CW laser (532 nm) induced damage mechanism has been studied on Ag/TiO₂ bilayer thin films exhibiting diffused silver mediated plasmonic absorption. The thin films were deposited by e-beam evaporation technique under various O₂ flow conditions in the range of 0–20 sccm. The required exposure time (t_D) for onset of damage under irradiance of 37 W/cm² has been measured to be in the range from 118 to 1244 s. Standing Wave Electric Field (SWEF) distribution has been simulated for all the Ag/TiO₂ bilayer thin films based on the film optical constants retrieved from spectroscopic ellipsometry analysis. It has been observed that t_D is mainly governed by two primary factors (in 2–16 sccm range) visualizing the shift of SWEF peak position with respect to Ag/TiO₂ interface and the possible increase in thermal conductivity of TiO₂ controlled by diffused Ag concentration across the interface. The SWEF magnitude and light absorbance seems to have relatively lesser bearing on laser withstanding time. Beyond 16 sccm, t_D slightly decreases due to increase in surface roughness of the film. The required exposure time, t_D is the highest for 0 sccm sample of which there is negligible interfacial Ag diffusion. All these results suggest that interfacially diffused plasmonic silver nanoparticles play an important role in deciding laser dose withstandability of Ag/TiO₂ bilayer thin film system through control of electric field distribution and possibly thermal conductivity of TiO₂ layer.