Owing to the very different electrovalences of indium and silver, nanoparticles made of these elements are among the simplest examples of hybrid plasmonic systems retaining a full metallic character. The optical properties of small indium-silver clusters are investigated here for the first time in relation to their structural characterization. They are produced in the gas phase by a laser vaporization source and co-deposited in a silica matrix. The optical absorption of fresh samples is dominated by a strong surface plasmon resonance (SPR) in the near UV, in an intermediate position between those of pure elements. A combination of SPR analysis and electron microscopy imaging provides evidence for the favourable surface segregation of indium. After a prolonged exposure to ambient air and because of the silica matrix porosity, changes in the SPR reflect the spontaneous formation of a dielectric indium oxide shell around a metallic silver core. The metallic character of indium can nevertheless be recovered by annealing under a reducing atmosphere. The reversibility of these processes is directly mirrored in optical measurements through SPR shifts and broadenings as supported by multi-shell Mie theory calculations. By controlling their oxidation level, In-Ag clusters can be considered as new candidates to extend SPR spectroscopy in the UV range and model plasmonic systems consisting of a silver particle of potentially very small size, fully protected by a dielectric oxide shell. © 2014 the Owner Societies.