Silver is an effective antimicrobial agent with low toxicity, which is important especially in the treatment of burn wounds where transient bacteremia is prevalent and its fast control is essential. Drugs releasing silver in ionic forms are known to get neutralized in biological fluids and upon long-term use may cause cosmetic abnormality, e.g., argyria and delayed wound healing. Given its broad spectrum activity, efficacy and lower costs, the search for newer and superior silver based antimicrobial agents is necessary. Among the various options available, silver nanoparticles have been the focus of increasing interest and are being heralded as an excellent candidate for therapeutic purposes. This report gives an account of our work on development of an antimicrobial gel formulation containing silver nanoparticles (SNP) in the size range of 7-20 nm synthesized by a proprietary biostabilization process. The typical minimum inhibitory concentration (MIC) and minimum bactericidal concentration (MBC) against standard reference cultures as well as multidrug-resistant organisms were 0.78-6.25 microg/mL and 12.5 microg/mL, respectively. Gram-negative bacteria were killed more effectively (3 log(10) decrease in 5-9 h) than Gram-positive bacteria (3 log(10) decrease in 12 h). SNP also exhibited good antifungal activity (50% inhibition at 75 microg/mL with antifungal index 55.5% against Aspergillus niger and MIC of 25 microg/mL against Candida albicans). When the interaction of SNP with commonly used antibiotics was investigated, the observed effects were synergistic (ceftazidime), additive (streptomycin, kanamycin, ampiclox, polymyxin B) and antagonistic (chloramphenicol). Interestingly, SNP exhibited good anti-inflammatory properties as indicated by concentration-dependent inhibition of marker enzymes (matrix metalloproteinase 2 and 9). The post agent effect (a parameter measuring the length of time for which bacterial growth remains suppressed following brief exposure to the antimicrobial agent) varied with the type of organism (e.g., 10.5 h for P. aeruginosa, 1.3 h for Staphylococcus sp. and 1.6 h for Candida albicans) indicating that dose regimen of the SNP formulation should ensure sustained release of the drug. To meet this requirement, a gel formulation containing SNP (S-gel) was prepared. The antibacterial spectrum of S-gel was found to be comparable to that of a commercial formulation of silver sulfadiazine, albeit at a 30-fold less silver concentration. As part of toxicity studies, localization of SNP in Hep G2 cell line, cell viability, biochemical effects and apoptotic/necrotic potential were assessed. It was found that SNP get localized in the mitochondria and have an IC(50) value of 251 microg/mL. Even though they elicit an oxidative stress, cellular antioxidant systems (reduced glutathione content, superoxide dismutase, catalase) get triggered and prevent oxidative damage. Further, SNP induce apoptosis at concentrations up to 250 microg/mL, which could favor scarless wound healing. Acute dermal toxicity studies on SNP gel formulation (S-gel) in Sprague-Dawley rats showed complete safety for topical application. These results clearly indicate that silver nanoparticles could provide a safer alternative to conventional antimicrobial agents in the form of a topical antimicrobial formulation.