Plant mediated synthesis of metal nanoparticles (MNPs) has been considered as a reliable green technique for mitigating the involvement of toxic chemicals and which is widely used for desired applications. In the present study, a simple and environment friendly approach for the synthesis of silver nanoparticles (AgNPs) using the aqueous extract of Cynodon dactylon was proposed. The phytochemicals present in C. dactylon acted as the reducing as well as the capping agents during the nanoparticle synthesis. The aqueous extract of C. dactylon added to AgNO3 solution showed a colour change from brown to black at room temperature which confirmed the formation of AgNPs. UV-Vis spectral analysis revealed the surface plasmon resonance band of synthesised AgNPs at around 380 nm, while FT-IR spectroscopy confirmed the role of biomolecules present in the plant extract in the reduction and efficient stabilisation of AgNPs. The X-ray diffraction (XRD) patterns confirmed distinctive peaks corresponding to the crystalline planes of cubic silver. Shape and surface morphology of green AgNPs were examined by SEM. Biosynthesized AgNPs were predominantly cubical and spherical with an average particle size of 30.5 nm approximately as observed through SEM and DLS analysis respectively. The EDS analysis displayed intense signals of silver element. The stability of AgNPs was confirmed by zeta potential analysis. A negative zeta potential value of −17.1 mV indicated the stability and good dispersion of AgNPs. Antimicrobial and anti-inflammatory potentials of green synthesised AgNPs were analysed through in vitro techniques. The cytotoxic effect of green AgNPs on normal fibroblast cells (L929) was studied to analyse its effect on normal cells.