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A series of Co x Ag 1- x nanostructured granular films have been prepared by ion beam sputtering and annealed at 100, 250, 400, 500℃. The optical constants, the complex dielectric function and magneto-optical Kerr parameters were measured at room temperature. For the samples having low Co compositions, the strong Kerr effect enhancement is observed around the Ag plasma edge. With an increase in annealing temperature, the resonance-like peaks appear in the Kerr rotation, and the peak positions are shifted toward the low photon energy region. From the analysis of the numerical calculations, it is concluded that the magneto-optical Kerr effect enhancement (MOKE) is due to the presence of the steep plasma edge.