Occurrence of silver nanoparticles (AgNPs) in wastewater treatment systems could impact the ammonia oxidation (AO). This study investigated the reduction of AgNPs and dissociated silver ion (Ag+) toxicity on nitrifying sludge using cell entrapment technique. Three entrapment materials, including barium alginate (BA), polyvinyl alcohol (PVA), and a mixture of polyvinyl alcohol and barium alginate (PVA-BA), were applied. The BA beads provided the highest reduction of silver toxicity (up to 90%) and durability. Live/dead assays showed fatality of entrapped cells after exposure to AgNPs and Ag+. The maximum AO rate of the BA-entrapped cells was 5.6 mg-N/g-MLSS/h. The AO kinetics under the presence of silver followed an uncompetitive inhibition kinetic model. The experiments with AgNPs and Ag+ gave the apparent maximum AO rates of 4.2 and 4.8 mg-N/g-MLSS/h, respectively. The apparent half-saturation constants of the BA-entrapped cells under the presence of silver were 10.5 to 13.4 mg/L. Scanning electron microscopic observation coupled with energy-dispersive X-ray spectroscopy indicated no silver inside the beads. This elucidates that the silver toxicity can be reduced by preventing silver penetration through the porous material, leading to less microbial cell damage. This study revealed the potential of the entrapment technology for mitigating the effect of silver species on nitrification.