Here we carried out a comparative study on two cost and time effective methods of encapsulating silver nanoparticles (AgNP) in dipalmitoyl-phosphatidyl choline (DPPC)/cholesterol-based liposome to enhance its cytotoxicity and reduce cytotoxic concentrations and evaluated the effect of this on a blood cell line (THP1 monocytes) often involved in uptake of nanoparticles during human exposure. DLS and Zeta potential analyses over a 6-months period showed the extruded Lipo-AgNP (ExLipo-AgNP) exhibited more stable characteristics when compared with the probe-sonicated Lipo-AgNP (PB-Lipo-AgNP). SEM microscopy indicated agglomeration of the PB-Lipo-AgNP which was not observed in Ex-Lipo-AgNP. Ex-Lipo-AgNP also exhibited higher temperaturedependent stability with 35.3% reduction in size from 20 C to 37 C while PB-Lipo-AgNP was less stable exhibiting 55% size reduction over same temperature range. Load release study over 24 h showed a controlled load release from Ex-Lipo-AgNP while the PB-Lipo-AgNP exhibited burst release at pH 4 and 6.5. Interestingly, it was found that Ex-Lipo-AgNP induced significantly higher toxicity on THP1 cell line after 24 h exposure compared with control unexposed cells; uncoated AgNP and PB-Lipo-AgNP exposed cells at the same concentration. Thus, for the first time, we report that liposomal encapsulation of AgNP by extrusion produces a stable nanocapsule with enhanced cytotoxicity, thus preventing overreliance on high AgNP concentration to achieve desired toxicity.