The biofabricated silver nanoparticles are extensively used in environmental, biotechnological and biomedical applications. The synthesis of SNPs has been carried out by using the filtrate extract of novel fungal strain Penicillium atramentosum KM. To undertake this study, P. atramentosum KM extract was exposed to silver nitrate and the obtained SNPs were thoroughly analyzed using physicochemical characterization tools such as UV–visible spectroscopy (UV–vis), Fourier transformation infrared (FTIR), X-ray diffraction (XRD) and transmission electron microscopy (TEM). As evident from the FTIR spectra plausibly the protein components of fungal extract caused the reduction of silver nitrate. The SNPs showed a characteristic UV–visible peak at 420 nm with an average size of 5–25 nm. The XRD record exhibited the characteristic peaks of 111, 200, 220 and 311 nanoparticles signifying that these nanoparticles were crystalline in nature. Parametric optimization showed maximum absorbance of 420 nm at pH 7, 25 °C with 3 mM silver nitrate, concentration ratio of fungal extract and silver nitrate was 5:5 in 72 h. The synthesized SNPs showed antimicrobial activity against bacterial strains.