Photochromic transitions in silver nanoparticles (AgNPs) embedded titanium dioxide (TiO2) films under green light illumination are marked by reduction in strength and blue shift in the position of the localized surface plasmon resonance (LSPR) associated with AgNPs. These transitions, which happen in the sub-nanometer length scale, have been analysed using the variations observed in the effective dielectric properties of the Ag-TiO2 nanocomposite films in response to the size reduction of AgNPs and subsequent changes in the surrounding medium due to photo-oxidation. Bergman-Milton formulation based on spectral density approach is used to extract dielectric properties and information about the geometrical distribution of the effective medium. Combined with finite element method simulations, we isolate the effects due to the change in average size of the nanoparticles and those due to the change in the dielectric function of the surrounding medium. By analysing the dynamics of photochromic transitions in the effective medium, we conclude that the observed blue shift in LSPR is mainly because of the change in the dielectric function of surrounding medium, while a shape-preserving effective size reduction of the AgNPs causes decrease in the strength of LSPR.