Metal nanoparticle synthesis by metal ion reduction from plant extract has paid immense attention to researchers owing to its low cost, easy synthesis and eco-friendly nature compared to other biological methods. Compared to monometallic nanoparticles, syntheses of bimetallic nanoparticles have great importance due to the possibility of better performance of bimetallic nanoparticles compared to their monometallic counterpart. To explore this possibility, we synthesized bimetallic Ag–Fe nanoparticles of different compositions using aqueous phase co-reduction of Ag+ and Fe3+ metal ions in different ratios by clove (Syzygium aromaticum) flower bud extract. Prepared nanoparticles were characterized by Ultraviolet–visible spectroscopy, powder X-ray diffraction and Scanning Electron Microscopic studies, etc. All bimetallic nanoparticles exhibited multifaceted applications as antimicrobial agents, antioxidants and dye adsorbents. Among the different nanoparticles, bimetallic nanoparticles having Ag–Fe ratio 80:20 exhibit better performance for antimicrobial and dye adsorption activity than mono as well as other bimetallic nanoparticles. As depicted by the powder X-ray diffraction study, the synergy between metals is attributed to the prevention of oxidation of silver to silver oxide in the presence of iron. However, antioxidant activity is directly related to silver content as both silver and silver oxide exhibit almost similar antioxidant properties. The synergy between the metals in bimetallic nanoparticles provided the opportunity to enhance the activity of nanomaterials for various applications along with lowering the cost. Besides the synthesis and activity study of bimetallic nanoparticles, we tried to provide theoretical evidence for the mechanism of metal ion reduction by Eugenol (a major phytochemical present in the clove extract). Structural optimization and thermodynamic parameter calculation using DFT methods suggest that eugenol is preferred to oxidize itself and theoretically calculated reduction potential is ∼ -3.40V at 300K in the gaseous phase.