Quantum dots (QDs) of ZnO of 2-4 nm size have been encapsulated within a SiO(2) matrix using aqueous chemically grown ZnO nanoparticles in a precursor of tetraethyl orthosilicate. The microstructure shows almost a uniform embedment of the QDs in the SiO(2) matrix, resulting in a ZnO QDs-SiO(2) composite structure. The photocurrent transients of the composite show an instant fall in the current followed by an exponential decay under ultraviolet (UV) illumination, causing negative photoconductivity (NPC), in contrast to the positive photoconductivity in only ZnO nanoparticles. The interface defect states due to the presence of the SiO(2) network around ZnO act as charge trap centers for the photoexcited electrons and are responsible for the NPC. The presence of interface-trapped charges under UV illumination has been further confirmed from capacitance-voltage measurements.