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Au nanoparticles confined in an Al2O3 matrix are synthesized using pulsed laser deposition method and rapid thermal annealing technique. The confined Au nanoparticles experience a compressive strain during the growth process. It is demonstrated that hydrogen passivation can be used to enhance and tailor the optical properties of confined Au nanoparticles by engineering the strain and defect states of the confined Au nanoparticles. The findings provide an insight and useful methodology to improve the emission efficiency of noble metal nanoparticle based materials for potential application in optoelectronic and photonic devices.