Silver nanoparticles (AgNPs) have been known to have inhibitory and bactericidal effects. In this paper we investigated: (i) the synthesis and kinetics of finely dispersed AgNPs in a biocompatible chitosan-derived polysaccharide solution; (ii) the antibacterial activities toward both gram− (Escherichia coli and Pseudomonas aeruginosa) and gram+ bacteria (Lactobacillus fermentum, Staphylococcus aureus and Baciilus subtilis) and yeast (Candida albicans) of the obtained AgNPs; and (iii) in vitro cytotoxicity against HepG2 (hepatocellular carcinoma), Lu (human lung carcinoma), KB (human epidermic carcinoma), MCF-7 (human breast carcinoma) cancer cell lines. The samples demonstrated considerably high antibacterial and antiproliferative activities against above bacterial strains and cell lines, which can be explained on the basis of finely and homogenously dispersed nanoparticles.