Microbial reduction of silver ion (conc. 1 mM AgNO3) was performed by Alkaliphilus oremlandii strain ohILAs in an alkaline pH 10. The synthesized silver nanoparticle was stabilized by poly(3-hydroxybutyrate-co-3-hydroxyvalerate) biopolymer which was also synthesized by the microbial culture of Alkaliphilus oremlandii strain ohILAs at pH8. The particle size and shape of the silver nanoparticles was studied by dynamic light scattering and under a transmission electron microscope and it was found that the particle size of polymer stabilized colloidal silver was comparatively lower (22-43nm) than that for the unstabilized one (63-93 nm). The stabilization of nanoparticles in polymer dispersed medium after around 60 days was confirmed from analysis of UV-visible spectroscopy and scanning electron microscopy. The crystalline peaks as recorded with X-ray's diffraction were observed at 2h values of 38° and 43°, indicating the fcc crystalline structure of the silver nanoparticle. The antimicrobial activity of silver nanoparticles on gramnegative bacteria strain (Escherichia coli XL1B) and gram-positive strain (Lysinibacillus fusiformis) showed better performance by the solution of polymer stabilized nanoparticle than that for the non polymer stabilized one. The reduction of nitro group in p-nitrophenol to p-aminophenol was observed from the analysis of UV-Visible spectroscopy in which, the shifting of absorption peak at 400 to 295 nm and the simultaneous regeneration of light brown color (λmax 410 nm) of silver nanoparticles confirmed the catalytic activity of silver nanomaterials. © 2014 Wiley Periodicals, Inc.