Multifunctional fabrics using conventional processes have piqued increasing global interest. The focus of this experiment was to assess the modification of the cotton fabric surface by utilizing silver nanoparticles (AgNPs) and introducing functional properties along with sustainable dyeing performance. A single-jersey knitted fabric composed of cellulose-enriched 100% natural fiber (cotton) with an areal density of 172 GSM was used in this study. The standard recipe and test methods were employed. FTIR-ATR spectra were used to determine the fixing of AgNPs onto the fiber surface. A comparative assessment was conducted in response to the distribution of color, color fastness to wash, water, perspiration, rubbing, and light. Scanning electron microscopy (SEM) was used to characterize the surface of nano-Ag-deposited specimens. In terms of functional properties, antimicrobial activity was scrutinized. Our findings reveal that the nanoparticles impart remarkable antibacterial effects to cellulose-enriched fabric against S. aureus (Gram-positive) and E. coli (Gram-negative). Direct dyes were used for dyeing the proposed samples, resulting in enhanced dyeing performance. Except for light fastness, the samples dipped with AgNPs showed outstanding color levelness and color durability characteristics. The developed fabrics can be applied in a wide range of functions, including protective clothing, packaging materials, and healthcare, among others.