Gold nanoparticles (AuNPs) were prepared by UV-irradiation technique at different irradiation times. Polyvinyl alcohol with two different molecular weights was used as encapsulating agent. The PVA capped gold nanoparticles showed surface plasmon bands at 531 nm after 1 h UV-irradiation and emission band at 365 nm and 394 nm with an excitation wavelength 300 nm. TEM micrograph showed that majority of the AuNPs are spherical, some are hexagonal, triangular and rod shaped. The XRD study clearly indicates formation of AuNPs. The preferential growth along (111) plane is also evident from XRD and has supported the results obtained from HRTEM analysis. The FTIR study suggested that interaction between AuNPs and the polymer matrix takes place through O-H groups. It was found that not only concentration and molecular weight of PVA but also irradiation time play important role in the formation of AuNPs. Antibacterial activity of AuNPs, Gentamicin and Gentamicin-AuNPs mixture against Bacillus Subtilis was examined by the agar well diffusion method. The antibacterial activity of Antibiotic-AuNPs mixture was found to be higher than that of pure antibiotic. Antibacterial activity showed that AuNPs can act as an effective drug carrier in drug delivery system.