The aim of this study was to synthesize highly biocompatible and functionalized silver nanoparticles using endophytic fungi isolated from the leaves of medicinal plants. Among 13 fungi tested, the isolate, Guignardia mangiferae (Bios PTK 4) extracellularly synthesized well-dispersed and extremely stable silver nanoparticles under optimized reaction conditions within 12 h. These nanoparticles were characterized by HR-TEM, SAED, XRD and EDX analyses. G. mangiferae synthesized 5-30 nm sized, spherical shaped silver nanoparticles. Effect of pH on the antibacterial activity of silver nanoparticles was studied using well diffusion assay; on the basis of particle stability and antibacterial activity, pH 7 was found to be optimum. The leakage of intracellular components has clearly demonstrated that silver nanoparticles damage the bacterial cells by formation of pores, which affect the membrane permeability and finally leads to cell death. In addition, silver nanoparticles exhibited excellent antifungal activity against plant pathogenic fungi. Cytotoxic effects of silver nanoparticles showed IC50 values of 63.37, 27.54 and 23.84 μg/mL against normal African monkey kidney (Vero), HeLa (cervical) and MCF-7 (breast) cells, respectively, at 24 h incubation period. Thus, the obtained results convincingly suggest that silver nanoparticles synthesized from G. mangiferae are highly biocompatible and have wider applicability and they could be explored as promising candidates for a variety of biomedical/pharmaceutical and agricultural applications.