The effect of a cavity on the third-order optical nonlinearity, is studied for a two-level system with excitation frequency ω0, as a function of the Q factor, coupling constant g, and longitudinal (γ1) and pure transverse (γ2) damping constants. The largest enhancement is found in the strong-coupling regime with γ1+2γ2=ω0/2Q. Large enhancement is also achieved in the weak-coupling regime satisfying the condition , and the intensity depends on damping constants only. The calculation is based on the cavity QED because the semiclassical treatment of the cavity quasimode leads to incorrect optical nonlinearity.