This study was aimed to isolate soil fungi from Kolli and Yercaud Hills, South India with the ultimate objective of producing antimicrobial nanoparticles. Among 65 fungi tested, the isolate, Bios PTK 6 extracellularly synthesized both silver and gold nanoparticles with good monodispersity. Under optimized reaction conditions, the strain Bios PTK 6 identified as Aspergillus terreus has produced extremely stable nanoparticles within 12h. These nanoparticles were characterized by UV-vis. spectrophotometer, HR-TEM, FTIR, XRD, EDX, SAED, ICP-AES and Zetasizer analyses. A. terreus synthesized 8-20 nm sized, spherical shaped silver nanoparticles whereas gold nanoparticles showed many interesting morphologies with a size of 10-50 nm. The presence and binding of proteins with nanoparticles was confirmed by FTIR study. Interestingly, the myco derived silver nanoparticles exhibited superior antimicrobial activity than the standard antibiotic, streptomycin except against Staphylococcus aureus and Bacillus subtilis. The leakage of intracellular components such as protein and nucleic acid demonstrated that silver nanoparticles damage the bacterial cells by formation of pores, which affects membrane permeability and finally leads to cell death. Further, presence of nanoparticles in the bacterial membrane and the breakage of cell wall were also observed using SEM. Thus, the obtained results clearly reveal that these antimicrobial nanoparticles could be explored as promising candidates for a variety of biomedical and pharmaceutical applications.