Tb3+ and Ag co-doped glass nano-composites were synthesized in a glass matrix Li2O-LaF3-Al2O3-SiO2 (LLAS) by a melt-quench technique. The growth of Ag nanoparticles (NPs) was controlled by a thermal annealing process. A broad absorption band peaking at about 420 nm was observed due to surface plasmon resonance (SPR) of Ag NPs. The intensity of this band grows with increasing annealing time. The transmission electron microscopic image (TEM) reveals the formation of Ag NPs in glass matrix. Photoluminescence (PL) emission and excitation spectra were measured for glass samples with different Ag concentrations and different annealing times. Plasmon enhanced Tb3+ luminescence was observed at certain excitation wavelength regions. Luminescence quenching was also observed for samples with high Ag concentration and longer annealing time. Our luminescence results suggest that there are two competitive effects, enhancement and quenching, acting on Tb3+ luminescence in the presence of Ag NPs. The enhancement of Tb3+ luminescence is mainly attributed to local field effects due to SPR. The quenching of luminescence suggests an energy transfer from Tb3+ ions to Ag NPs.