In this work, we have investigated the uses of herbal extract of Terminalia bellerica (T.bellerica) as an efficient reducing as well as capping agent for reliable green synthesis of silver nanoparticles (AgNPs) at room temperature. HR-TEM results of AgNPs confirmed that, the nanoparticles are spherical in shape with an average diameter of ~30 ± 6 nm.  XRD shows that, AgNPs exhibits the face centered cubic (FCC) structure. AgNPs utilized as a nanosensor probe for detection of mercury ions (Hg 2+ ). AgNPs showed a color change from brownish yellow to colorless on exposed to Hg 2+ due to the redox reaction of mercury and silver. This sensor probe showed a lower limit of detection of 0.3 ± 0.005 µM. Selectivity of the sensor has been evaluated towards other environmentally heavy metal ions and found that, this sensor is highly selective to Hg 2+ . AgNPs loaded poly (vinylalcohol) (PVA) films and nanofibers were fabricated by solvent casting and electrospinning methods, respectively. AgNPs loaded PVA films and nanofibers were tested for anti-bacterial studies against E. coli and B. subtils. The results indicate that the green synthesized AgNPs possess high microbial activity towards E.coli. These AgNPs based functional materials have great potential for application in sensors, anti-microbial coatings, wound dressing and smart textiles.