A simple route for the synthesis of silver-protein (core-shell) nanoparticles using spent mushroom substrate (SMS) has been demonstrated in this work. SMS exhibits an organic surface that reduces silver ions and stabilizes the silver nanoparticles by a secreted protein. The silver nitrate solution incubated with SMS changed to a yellow color from 24 h onward, indicating the formation of silver nanoparticles. The purified solution yielded the maximum absorbance at 436 nm due to surface plasmon resonance of the silver nanoparticles. X-ray analysis of the freeze-dried powder of silver nanoparticles confirmed the formation of metallic silver. Transmission electron microscopic analysis of the samples showed a uniform distribution of nanoparticles, having an average size of 30.5 +/- 4.0 nm, and its corresponding electron diffraction pattern confirmed the face-centered cubic (fcc) crystalline structure of metallic silver. The characteristic fluorescence of the protein shell at 435 nm was observed for the silver nanoparticles in solution, when excited at 280 nm, while Fourier transform infrared (FTIR) spectroscopy confirmed the presence of a protein shell. The silver nanoparticles were found to be stable in solution for more than 6 months. It is observed that the reducing agents from the safflower stalks caused the reduction of silver ions while protein secreted by the fungus stabilized the silver nanoparticles. These silver nanoparticles showed excellent antibacterial activity against two representative bacteria, Staphylococcus aureus (Gram positive) and Klebsiella pneumoniae (Gram negative), in spite of the presence of an organic layer as a shell. Apart from ecofriendliness and easy availability, "SMS" as a biomanufacturing unit will give us an added advantage in ease of handling when compared to other classes of microorganisms.