Surface-enhanced Raman scattering (SERS) study carried on thiazolidine-2,4-dione (TZD), a pharmacologically active heterocyclic compound, points to the presence of TZD dimer formed by plasmon-induced dimerization reaction of TZD on the surface of silver nanoparticles (Ag NP) at TZD concentrations of 10 M and above. The evidence for the presence of dimer was obtained from the appearance of a prominent band at 1566 cm corresponding to the ν(C═C) band (a characteristic vibrational band observed for the Knoevenagel condensation reaction products) which is absent in the normal Raman scattering (NRS) spectra of TZD solid/solution. The observed spectrum compares well with the calculated spectrum of dimer obtained using density functional theory (DFT) calculations. The dimerization reaction is plausibly induced by the transfer of hot electrons generated by the nonradiative plasmon decay of Ag NP, and the proposed reaction mechanism is discussed. However, at lower concentrations (10-10 M), the characteristic dimer peak (1566 cm) is absent and the SERS spectra resemble more the NRS spectrum of TZD with a few changes. The spectral analysis supported by DFT calculations showed that TZD molecules undergo deprotonation and get adsorbed on the Ag NP surface as enolate forms. The proximity of TZD molecules on the surface of Ag NP is a necessary factor for the dimerization to occur. At lower concentrations, most molecules lie apart and reactions between molecules become less feasible, and they remain as monomers on the surface, while at higher concentrations the molecules are closer to each other on the Ag NP surface favoring the dimerization reaction to take place, leading to the formation of the dimer.