The formation of thin nanocomposite films comprising colloidal gold particles in a fatty acid matrix by a simple solution based diffusion process is described. A simple two-step process accomplishes the formation of the composite films. In the first stage, avidin molecules are incorporated into thermally evaporated arachidic acid (AA) films by simple immersion of the lipid films in an aqueous solution of the protein. The diffusion of the avidin molecules is driven by attractive electrostatic interaction between charged side chains of the protein and the carboxylate ions of the AA matrix. Thereafter, biotinylated colloidal gold particles are incorporated into the protein-containing AA matrix by a similar immersion procedure. The high- affinity biotinavidin interaction drives the diffusion of the biotinylated gold particles into the matrix and a colloidal nanocomposite results. The kinetics of protein incorporation as well as colloidal particle diffusion in the fatty acid matrix were characterized using quartz crystal microgravimetry (QCM) and ultraviolet-visible spectroscopy and analyzed in terms of a one- dimensional diffusion model. The nanocomposite films were further characterized by Fourier transform infrared (FTIR) spectroscopy which, together with the QCM and UV-vis spectroscopy measurements of the biotin- avidin recognition driven gold particle diffusion, indicates that the protein molecules are encapsulated in the fatty acid matrix without significant perturbation to their biological activity.