The optical effect upon insertion of hydrogen into Pd-coated magnesium lanthanide switchable mirrors is investigated in terms of the changes of their complex refractive indices. A significant change in the optical constants of LnMg layers is seen between the as-deposited state and the dehydrided state after one cycle. Furthermore, the optical effect of switching the Pd cap layer to a PdH cap layer was determined. It is shown that the Pd layer mainly limits the visible transmittance of the hydrided stack to about 35%-40%. Whereas the extinction coefficient of dehydrided LnMg layers at 550 nm is between 2.2 and 3.1, it is as low as 10(-4) in the transparent state. This is of great promise to applications requiring large optical contrast (e. g., optical switches). (C) 1999 American Institute of Physics. [S0021-8979(99)05101- 4].