Nanoparticle (NP) synthesis by biological systems is more cost-effective, safe, and environmentally friendly when compared to currently used chemical and physical methods. Although many studies have utilized different plant extracts to synthesize NPs, few studies have incorporated living plants. In this study, silver nanoparticles (AgNPs) were synthesized exogenously by Tephrosia apollinea living plant system under the combined stresses of silver nitrate and different levels of drought stress simulated by Polyethylene glycol (PEG) (0, −0.1, −0.2, and −0.4 MPa for three and six days). Biomass, cell death, and H 2 O 2 content were evaluated to determine the toxicological effect of the treatments on the plant. More severe effects were detected in day 6 plants compared to day 3 plants, and at higher drought levels. UV-visible spectrum, energy dispersive X-ray spectroscopy, X-ray diffraction, scanning electron microscope, and Fourier transform infrared spectroscopy were used to detect and characterize the T. apollinea synthesized NPs. The shapes of the NPs were spherical and cubic with different phytochemicals being the possible capping agents. Broth microdilution was used to determine the antimicrobial activity of the NPs against Escherichia coli and Staphylococcus aureus. In this case, antimicrobial activity increased at higher PEG concentrations. Bactericidal effects were observed against E. coli, while only bacteriostatic effects were detected against S. aureus.