Nanocrystalline xAg–(1−x)Ba0.5Sr0.5TiO3 (Ag–BST, 0≤x≤0.1, where x is the mole fraction of Ag) thin films have been deposited on Pt/Ti/SiO2/Si substrates by a sol–gel method. The films have been characterized by X-ray diffraction (XRD), scanning electron microscopy, and X-ray photoelectron spectroscopy (XPS). The core-level XPS of oxygen (O1s) of the Ag–BST films indicate that an optimum amount of Ag (x=0.02 or 2 mol%) enhances the binding energy of oxygen, possibly through a mechanism in which the electrophilic oxygen dissociates from the Ag surface and fills the oxygen vacancies. Similarly, the binding energy of Ag (Ag3d) shows a shift toward a higher value with increasing Ag up to 4 mol%, probably because of the chemical shift of Ag in BST along the surface layers, surface relaxation, or changes in the Fermi level of small Ag particles in the solid solution range of Ag in BST films (x≤0.04). The leakage current density of 2 mol% Ag-added BST (∼10−6 A/cm2) is less by about an order of magnitude than pure BST at an electric field of 200 kV/cm. A defect model is proposed to explain the observed leakage current density of Ag–BST films satisfactorily.