Highly stable silver nanoparticles (Ag NPs) in agar–agar (Ag/agar) as inorganic–organic hybrid were obtained as free-standing film by in situ reduction of silver nitrate by ethanol. The antimicrobial activity of Ag/agar film on Escherichia coli (E. coli), Staphylococcus aureus (S. aureus), and Candida albicans (C. albicans) was evaluated in a nutrient broth and also in saline solution. In particular, films were repeatedly tested for antimicrobial activity after recycling. UV–vis absorption and TEM studies were carried out on films at different stages and morphological studies on microbes were carried out by SEM. Results showed spherical Ag NPs of size 15–25 nm, having sharp surface plasmon resonance (SPR) band. The antimicrobial activity of Ag/agar film was found to be in the order, C. albicans > E. coli > S. aureus, and antimicrobial activity against C. albicans was almost maintained even after the third cycle. Whereas, in case of E. coli and S. aureus there was a sharp decline in antimicrobial activity after the second cycle. Agglomeration of Ag NPs in Ag/agar film on exposure to microbes was observed by TEM studies. Cytotoxic experiments carried out on HeLa cells showed a threshold Ag NPs concentration of 60 lg/mL, much higher than the minimum inhibition concentration of Ag NPs (25.8 lg/mL) for E. coli. The mechanical strength of the film determined by nanoindentation technique showed almost retention of the strength even after repeated cycle.