There is general agreement that localized absorbing defects are a major factor affecting thin-film performance, and laserinduced damage in films designed for UV, nanosecond-scale, pulsed-laser applications is driven by nanoscale absorbers. Low number densities and size (few nanometer), however, prevent any characterization of these defects and, consequently, deterministic film improvement. This situation also hampers further development of localized defectdriven damage theory, since initial conditions for modeling remain uncertain. Recently, a new approach for studying laser interaction with thin-film nanoscale defects was implemented in which well-characterized, isolated artificial absorbing defects (gold nanoparticles) were introduced inside the thin film. This work is a review in which we discuss main findings from experiments with gold nanoparticles, such as delocalization of absorption during the laser pulse, importance of the defect boundary conditions (contact with the matrix), and competition of pure thermal and stressdriven mechanisms of damage-crater formation. These experimental results will be compared with theoretical results of damage-crater formation in such model thin films using both phenomenological modeling and detailed calculations of the kinetics of the damage process. An outlook on future thin-film-damage studies using model systems with artificial defects is also presented.© (2006) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.