We have recorded synchrotron radiation excited photoelectron spectra of free Ne and Ar cluster beams in the valence and inner valence region. Varying the cluster sizes from a few up to some hundred atoms, the development of inelastic energy losses of the outgoing photoelectrons is clearly visible. The first few energy loss features can be related to creation of excitons and interband transitions within the cluster. (C) 2002 Elsevier Science B.V. All rights reserved.