The optical properties of metallic spherical nanoparticles embedded in host liquid matrix are studied. Extended Maxwell-Garnett-Mie formulation which accounts for size dispersion, the intrinsic confinement, and extrinsic size effect, is proposed for the calculation of the effective dielectric function and absorption coefficient of size dispersion of colloidal solution of Au and Ag nanoparticles in water. We demonstrate that the size distribution induces an inhomogeneous broadening and an increase of the amplitude of the plasmon band. A large redshift of the plasmon band is also observed for silver nanoparticles. Compared to the conventional Maxwell Garnett theory, we demonstrated that this model gives better description of the measured absorption spectra of colloidal gold solutions.