Wool keratin (WK) protein is attractive for wound dressing and biomedical applications due to its excellent biodegradability, cytocompatibility, and wound-healing properties. In this work, WK-based wound dressings were prepared by depositing WK/poly(vinyl alcohol) (PVA) and silver nanoparticle (Ag NP)-embedded WK/PVA composite nanofibrous membranes on cotton fabrics by electrospinning. Ag NPs were biosynthesized by reduction and stabilization with sodium alginate. The formed Ag NPs were characterized by ultraviolet-visible and Fourier transform infrared (FTIR) spectroscopy, and their size was determined by transmission electron microscopy and image analysis. The formed Ag NPs were spherical and had an average diameter of 9.95 nm. The produced Ag NP-embedded WK/PVA composite nanofiber-deposited cotton fabric surface was characterized by FTIR and dynamic contact angle measurements, and the nanofiber morphologies were characterized by scanning electron microscopy. The average diameter of the nanofibers formed by 0.1% Ag NP-embedded WK/PVA solution was 146.7 nm. The antibacterial activity of the surface of cotton fabrics coated with electrospun composite nanofibers was evaluated against the two most common wound-causing pathogens, Staphylococcus aureus and Pseudomonas aeruginosa. The cotton fabric coated with 0.1% Ag NP-embedded WK/PVA nanofibers showed very good antibacterial activity against both pathogens, and 3-(4,5-dimethylthiazol-2-yl)-2,5-diphenyltetrazolium bromide (MTT) assay results showed good cytocompatibility against L-929 mouse fibroblast cells. However, the increase in Ag NP content in the nanofibers to 0.2% negatively affected the cell viability due to the high release rate of Ag ions. The results achieved show that the developed wound dressing has good potential for wound healing applications.