The development of reliable, eco-friendly processes for the synthesis of nanomaterials is an important aspect of nanotechnology today. One approach that shows immense potential is based on the biosynthesis of nanoparticles using biological micro-organisms such as bacteria. In this laboratory, we have concentrated on the use of fungi in the intracellular production of metal nanoparticles. As part of our investigation, we have observed that aqueous silver ions when exposed to the fungus Fusarium oxysporum are reduced in solution, thereby leading to the formation of an extremely stable silver hydrosol. The silver nanoparticles are in the range of 5-15 nm in dimensions and are stabilized in solution by proteins secreted by the fungus. It is believed that the reduction of the metal ions occurs by an enzymatic process, thus creating the possibility of developing a rational, fungal-based method for the synthesis of nanomaterials over a range of chemical compositions, which is currently not possible by other microbe-based methods.