Tremendous progress has been made in developing highly efficient cutting-edge materials and textile surfaces by applying a wide range of nanostructures during the past few years. Due to their extraordinary and attractive features, metal and metal oxide nanoparticles (NPs) have introduced prominent novel antimicrobial, photocatalytic, stain repellence, fire retardant, and UV protective functions on textile surfaces. Unfortunately, their conventional syntheses based on physicochemical procedures often require energy-intensive processes and toxic chemicals, bringing environmental and human safety concerns. To address these issues, the latest approaches based on the biological production of NPs on polymeric material surfaces are currently being pursued. In this perspective, we present a systematic and comprehensive summary of the biological in situ and ex situ formation of metallic NPs on the surfaces of textiles and fibers. A detailed and insightful discussion on the ex situ and in situ mechanisms of nanoparticle formation from chemical compounds derived from plants and fungi is also provided. Finally, critical research gaps are identified, and prospects for efficient and sustainable nanofinishing technologies for textile surfaces using biological chemicals are provided.