We use a dedicated Z-scan setup, arranged to account for cumulative effects, to study the nonlinear optical response of Ge nanocrystals embedded in silica matrix. Samples are prepared with plasma-enchanced chemical-vapor deposition and post-thermal annealing. We measure a third-order nonlinear refraction coefficient of gamma=1x10(-16) m(2)/W. The nonlinear absorption shows an intensity-independent coefficient of beta=4x10(-10) m/W related to fast processes. In addition, we measure a second beta component around 10(-9) m/W with a relaxation time of 300 mu s that rises linearly with the laser intensity. We associate its origin to the absorption of excited carriers from a surface-defect state with a long depopulation time.