It is known that extracellular biosynthesis of nano-particles could be highly advantageous for its synthesis in large quantities and easy downstream processing. Therefore, the present study aims to specify and determine the effective origin source for Ag-NPs produced by Escherichia coli strain S78, if it was culture broth, supernatant or cell pellet. The reduction of silver nitrate was determined by estimating the excreted amount of the enzyme nitrate reductase. Additionally, the produced silver from the specified corresponding production phase was characterized. Moreover, the antibacterial effect of produced Ag-NPs against both Gram positive and Gram negative bacteria was investigated. The results demonstrated that after 7 days of incubation culture broth produced the highest yield of Ag-NPs followed by the cell-free supernatant. FTIR spectra, nitrate reductase assay and accumulation efficiency confirmed the extracellular production of Ag-NPs. The results also revealed that the produced Ag-NPs has got a good antibacterial activity against Gram negative, when compared with the Gram positive bacteria. In final conclusion, the Ag-NPs produced in the culture broth of strain S78 could be used successfully as an environmental friendly disinfector of water and wastewater against pathogenic microorganisms. (C) 2012 Elsevier Ltd. All rights reserved.