A novel concept is proposed to synthesize a new class of composites featuring magnetic, molecular sieve and metallic nanoparticle properties. These multi- functional materials have potential applications as recyclable catalysts, disinfectants and sorbents. The magnetic property enables effective separation of the spent composites from complex multiphase systems for regeneration and recycle, safe disposal of the waste and/or recovery of loaded valuable species. The zeolite molecular sieve provides a matrix which supports a remarkably new, simple, efficient and economical method to make stable, supported silver nanoparticles by silver ion exchange and controlled thermal reduction. The silver nanoparticles generated in this way have excellent properties such as high reactivity and good thermal stability without aggregation, which act as nano reactors for desired functionality in a wide range of applications. Magnetic component (Fe3O4), molecular sieve matrix (zeolite) and silver nanoparticles generated by ion exchange followed by controlled reduction, together form this unique novel composite with designed functions. It represents a practically operational, economical, sustainable and environmentally friendly new advanced functional material. This paper focuses on the novel synthesis and characterization of the composite, with an example of applications as sorbents for the removal of vapor-phase mercury from the flue gas of coal-fired power plants.