Reduced graphene oxide (rGO) functionalized with silver nanoparticles (Ag NPs) is prepared using femtosecond laser ablation in liquids method. By ablating the mixed aqueous solutions of silver nitrate and graphene oxide (GO) using femtosecond laser pulses, Ag ions and GO are simultaneously reduced and well-dispersed Ag NPs supported on rGO are obtained. The effect of laser power, irritation time, and Ag ion concentration on the optical property and morphology of the products are systematically studied. The nonlinear optical (NLO) responses of the functionalized graphene are studied using nanosecond Z-scan technique. The rGO hybrid shows an enhanced nonlinear absorption effect compared with GO and rGO, and thus exhibits an excellent optical limiting (OL) property with very low activating threshold, which is estimated to be about 0.38 J/cm2. The enhanced NLA effect in rGO hybrids makes it possible to fabricate solid-state optical limiter, improving the practicality of graphene materials in OL area.