Development of environmental friendly procedures for the synthesis of metal nanoparticles through biological processes is evolving into an important branch of nanobiotechnology. In this paper, we report on the use of fungus "Fusarium semitectum" for the extracellular synthesis of silver nanoparticles from silver nitrate solution (i.e. through the reduction of Ag+ to Ag-0). Highly stable and crystalline silver nanoparticles are produced in solution by treating the filtrate of the fungus E semitectum with the aqueous silver nitrate solution. The formations of nanoparticles are understood from the UV-vis and X-ray diffraction studies. Transmission electron microscopy of the silver particles indicated that they ranged in size from 10 to 60 nm and are mostly spherical in shape. Interestingly the colloidal suspensions of silver nanoparticles are stable for many weeks. Possible medicinal applications of these silver nanoparticles are envisaged. (C) 2007 Elsevier Ltd. All rights reserved.