We present a study of the optical and magneto-optical (MO) properties of Co nanoparticles embedded in ZrO2 in the spectral range from 1.4 to 4.3 eV. The nanostructured films were prepared by pulsed laser deposition in a wide range of Co nanoparticle concentrations varying from 20% to 80%. For Co concentration lower than x~0.45 the size of the nanoparticles was found to remain almost constant (D~2.5 nm), whereas it increases above it. Differences are found between the optical and MO constant of the Co nanoparticles and those of continuous Co films. Those differences are associated with size effects of the intraband contribution inside the nanoparticles.