We present an innovative method for modulating light using a ferroelectric thin-film embedded with metal nanoparticles. Due to the electro-optic effect in ferroelectric PZT, changes in refractive index can be controlled by an external electric field. Consequently, the local surface plasmon resonance of embedded noble metal nanoparticles changes with the media's refractive index. As a result, their optical extinction cross-section is shifted and light passing through the film could be controlled. In other words, an external electric field could modulate light. Using Mie theory for spherical particles, we were able to approximate the metallic nanoparticle's diameter that generates the maximum optical contrast, at a given wavelength. In addition, to establish an accurate model, we considered the impact on plasmon resonance resulting from deformation of the nanoparticles. The deformation is caused by the piezoelectric property of the ferroelectric host material. We assumed 20 nm diameter Au or Ag nanoparticles embedded in a 1 μm thick PZT film. Simulations showed that these particles can reach an optical contrast of up to 12 dB, in the visible spectrum. In addition, deformation of particles had negligible impact on the shift in resonance frequency compared to the change in PZT refractive index. In this study we have shown that a nanocomposite comprising of nanoparticles embedded PZT thin film can perform as an optical modulator. This modulator will be able to achieve a high contrast with low power consumption.