Bioreduction of Au3+ to Au0 and subsequent synthesis of gold nanoparticles using three cyanobacterial strains Leptolyngbya tenuis, Coleofasciculus chthonoplastes, and Nostoc ellipsosporum was investigated. The optimized condition for maximum gold nanoparticle synthesis was determined as 20 mg cyanobacterial biomass per 100 mL of 15 mg L−1 Au3+ solution as inoculum size at pH 5. At the onset of nanoparticle synthesis (up to 3 h) increased activity of catalase, ascorbate peroxidase, super oxide dismutase, and malondialdehyde content along with rapid loss of pigments and protein content (1–72 h) indicated gold toxicity at cellular level. Associated changes in thallus morphology were also significant. Nostoc biomass produced spherical- to irregular-shaped nanoparticles with diverse sizes and small number of nanorods. On the other hand, Coleofasciculus showed nanoparticle synthesis at extracellular medium which was either absent in Nostoc or very low in Leptolyngbya. Biosafety analysis by MTT assay using peripheral blood mononuclear cells (PBMC), two cancer cell lines viz. T cell acute (T-ALL) and human acute lymphoblastic leukemia (MOLT-4) and antibacterial effect against Pseudomonas aeruginosa and Staphylococcus aureus showed no toxic effect of synthesized gold nanoparticles. © 2016, Springer Science+Business Media Dordrecht.