The beta-cyclodextrin-modified Ag-TiO2 core-shell nanoparticles were prepared by sodium borohydrate reduction of AgNO3 and the subsequent hydrolysis of the tetraisopropyl orthotitanate in an aqueous medium. Inversely in the preparation of beta-cyclodextrin-modified TiO2-Ag core-shell nanoparticles, first hydrolysis and then following reduction were carried out. The synthesized spherical core-shell nanoparticles were highly water-dispersible and had an average diameter in the range of 9 to 12 nm. A significant shifting of surface plasmon band was observed for the synthesized Ag-TiO2 and TiO2-Ag core-shell nanoparticles. On a model reaction, namely, the photodegradation of phenol by the UV light irradiation, the photocatalytic property of TiO2 nanoparticles was enhanced, when the Ag nanoparticle was embedded in the core of TiO2 nanoparticles but TiO2 nanoparticles coated by Ag shell decreased the photocatalytic property of TiO2 nanoparticles. The mechanism is ascribed to the surface plasmon characteristics of Ag in the core of the TiO2 nanoparticles under the acceleration by host-guest inclusion characteristics.