The ionic and electronic steps in the initial photolysis of silver halide to form silver clusters have been analyzed by a combination of classical and quantum mechanical procedures. We have applied Hartree-Fock and local density methods to the problem and included treatment of the long-range lattice polarization. It is found that the electron-accepting and hole-accepting levels of these clusters depend strongly upon their site of adsorption. The positive kink is a favorable site for growth where electrons from the conduction band can be trapped prior to neutralization by interstitial silver ions. It is shown that relaxation of the cluster geometry following electron capture is an important means of deepening the electron trapping level. Hole trapping is possible at some of these clusters, leading to a reduction in their size. Overall, the picture that emerges is consistent with the generally accepted nucleation and growth mechanism of photolysis.