Chitosan nanofibers have been electrospun with poly(ethylene oxide) and silver nitrate, as a coelectrospinning polymer and silver nanoparticle precursor, respectively. The average diameter of the as-spun chitosan nanofibers with up to 2 wt % silver nitrate loading was approximately 130 nm, and there was no evidence of bead formation or polymer agglomeration. Argon plasma was then applied for surface etching and synthesis of silver nanoparticles via precursor decomposition. Plasma surface bombardment induced nanoparticle formation primarily on the chitosan nanofiber surfaces, and the moderate surface plasma etching further encouraged maximum exposure of silver nanoparticles. UV-vis spectra showed the surface plasmon resonance signature of silver nanoparticles. The surface-immobilized nanoparticles were visualized by TEM and were found to have average particle diameters as small as 1.5 nm. Surface analysis by infrared spectroscopy and X-ray photoelectron spectroscopy confirmed the interactions between the silver nanoparticles and chitosan molecules, as well as the effect of plasma treatment on the nanofiber surfaces. Finally, a bacteria inhibition study revealed that the antibacterial activity of the electrospun chitosan nanofibers correspondingly increased with the plasma-synthesized silver nanoparticles.