We investigate the effects of silver nanoparticles capped by 1-octanethiol (AgSC8) incorporated into the active layer of regioregular poly (3-hexylthiophene) (P3HT) and [6,6]-phenyl C61 butyric acid methyl ester (PCBM) in the fabrication of an inverted hybrid solar cell. The localized surface plasmon resonance (LSPR) excited in AgSC8 is expected to enhance the photon absorption as well as improve the efficiency of exciton generation and dissociation in this type of solar cell. The measured UV–visible absorption spectra show that photoactive polymer (P3HT:PCBM) layers with 2.09[Formula: see text]wt.% and 3.34[Formula: see text]wt.% AgSC8 incorporations remain homogeneous, while it appears aggregated with 5.02[Formula: see text]wt.% AgSC8 incorporation. Under the illumination of 100[Formula: see text]mW/cm2 simulated solar irradiation, the fabricated device exhibits an increased open circuit voltage ([Formula: see text] from 0.327[Formula: see text]V to 0.665[Formula: see text]V for the case with 3.34[Formula: see text]wt.% AgSC8 incorporation and an improved device power conversion efficiency (PCE) from 1.01% to 1.92%. These results suggest the favorably role of AgSC8 in photo-generation of exciton and its dissociation at the LSPR frequency of AgSC8. The decrease of short circuit current density ([Formula: see text] from 10.316[Formula: see text]mA/cm2 to 8.668[Formula: see text]mA/cm2 nevertheless implies reduced conductivity due to AgSC8 incorporation.