Nanosize silver particles are formed in aqueous surfactant systems and have been found to be very reactive toward oxygen in the presence of borohydride. Purging of air (O-2) or simple shaking leads to complete dissolution of silver particles, which is further regenerated on standing. Thus an oscillation between a yellow silver plasmon band and colorless solution is observed on periodic shaking. This oscillation continues as long as excess borohydride is present. Investigation shows that borohydride, which is a strong nucleophile, adsorbs on the surface of the silver particle and decreases the reduction potential of the silver particle so that it reacts rapidly with oxygen. Surfactant plays an extra role over particle stabilization. It removes the oxidized silver from the particle surface to the bulk and also retards the rate of reduction of Ag-I to Ag-0.