This report provides for the first time a novel environment friendly extracellular synthesis of stable silver nano-bioconjugates (SNBCs) at room temperature at pH 5.0 using Penicillium citrinum MTCC 9999 biomass. The UV-Visible spectral scan of dispersed SNBCs solution showed absorption in the region 340-450 nm due to surface plasma resonance (SPR). Typical Transmission Electron Microscopic (TEM) images showed that although two populations were present but most of them were in 20-30 nm range. Average zeta potential of SNBCs was -21 mV suggesting some biomolecules capped the nanoparticles imparting a net negative charge over it. FTIR analysis also showed that biomolecules were involved in stabilization. SNBCs showed strong antibacterial activity against both Gram positive (Bacillus subtilis) and Gram negative bacteria (Escherichia coli). SNBCs also showed strong antifungal activity as assessed against Schizosaccharomyces pombe. In the case of E. coli the minimum inhibitory concentrations (MIC) of SNBCs was 4 μg/ml while in B. subtilis it was 8 μg/ml. In the case of E. coli the minimum bactericidal concentrations (MBC) of SNBCs was 8 μg/ml while in B. subtilis it was 32 μg/ml. The SNBCs exerted its antibacterial and antifungal activity through generation of reactive oxygen species (ROS) inside the cell.