An environmentally friendly, cost effective, and simple methodology for the preparation of surface modified graphene has been described in this paper. Baker's yeast containing nicotinamide adenine dinucleotide phosphate (NADPH) has been used as a reducing and functionalizing agent. The amine functional groups of NADPH can easily couple with the epoxy functionalities of graphene oxide (GO) and forms stable water dispersion of yeast-reduced graphene oxide (YR-GO). Ultraviolet–visible spectroscopy, Fourier transform infrared spectroscopy (FT-IR), and X-ray photoelectron spectroscopy (XPS) analysis confirm the successful reduction of GO to graphene. FT-IR and XPS analysis also indicate the doping of amine (NH₂) functionalities of NADPH molecules on the surface of graphene. The formation of defects further supports the bio-functionalization of graphene as indicated in the Raman spectrum of YR-GO. All these findings clearly indicate that GO can be reduced and functionalized by simple eco-friendly method by using Baker's yeast to produce water dispersible graphene.