This research presents a novel and environmentally friendly approach for the synthesis of multifunctional nanobiocomposites for the efficient removal of toxic heavy metal and dye, as well as the disinfection of wastewater microorganisms. The nanobiocomposites (KAC-CS-AgNPs) were prepared by incorporating photochemically generated silver nanoparticles (AgNPs) within a chitosan (CS)-modified, high-surface-area activated carbon derived from kenaf (KAC), using a unique self-activation method. The even distribution of AgNPs was visible in the scanning electron microscopy images and a Fourier transform infra red study demonstrated major absorption peaks. The experimental results revealed that KA-CS-AgNPs exhibited exceptional adsorption efficiency for copper (Cu2+), lead (Pb2+), and Congo Red dye (CR), and showed potent antibacterial activity against Staphylococcus aureus and Escherichia coli. The maximum adsorption capacity (mg g−1) of KAC-CS-AgNPs was 71.5 for Cu2+, 72.3 for Pb2+, and 75.9 for CR, and the adsorption phenomena followed on the Freundlich and Langmuir isotherm models and the second-order kinetic model (R2 > 0.99). KAC-CS-AgNPs also exhibited excellent reusability of up to four consecutive cycles with minor losses in adsorption ability. The thermodynamic parameters indicated that the adsorption process was spontaneous and endothermic in nature. The bacterial inactivation tests demonstrated that KAC-CS-AgNPs had a strong bactericidal effect on both E. coli and S. aureus, with MIC calculated for E. coli and S. aureus as 32 µg mL−1 and 44 µg mL−1, respectively. The synthesized bioinspired nanocomposite KAC-CS-AgNPs could be an innovative solution for effective and sustainable wastewater treatment and has great potential for commercial applications.