Lignin nanoparticles (LNPs) were employed as the reducing and stabilizing agent in the preparation of silver nanoparticles (Ag NPs) from silver nitrate under solar light. The Ag NPs were characterized by spectrophotometry, TEM, HRTEM, element mapping, XRD and XPS. The formation of Ag NPs and the structural changes of lignin during the reaction was monitored by analysis via P NMR, H NMR and C NMR. The Ag NPs have uniform shape and an average size of ~14 nm. They were loaded onto the surface of LNPs and entangled in lignin. The resulting Ag NP-LNP suspension displays an ultrasensitive and selective optical response to Hg (II) in giving a color change from yellow to colorless. The assay was performed by spectrophotometry at 450 nm. The analytically useful range extends from 5 nM to 100 nM of Hg (II), and the limit of detection is 1.4 nM in deionized water and 1.8 nM in spiked tap water. This is lower than the threshold level (10 nM) in drinking water specified by the US Environmental Protection Agency. Graphical abstract Schematic representation of the solar light induced synthesis of sliver nanoparticles (Ag NPs) by lignin nanoparticles (LNPs) and their application to colorimetric determination of Hg.