DNA cross-linked hydrogel was used as a matrix for synthesis of gold nanoparticles. DNA possesses a strong affinity to transition metals such as gold, which allows for the concentration of Au precursor inside a hydrogel. Further reduction of HAuCl4 inside DNA hydrogel yields well dispersed, non-aggregated spherical Au nanoparticles of 2-3 nm size. The average size of these Au nanoparticles synthesized in DNA hydrogel is the smallest reported so far for in-gel metal nanoparticles synthesis. DNA hybrid hydrogel containing gold nanoparticles showed high catalytic activity in the hydrogenation reaction of nitrophenol to aminophenol. The proposed soft hybrid material is promising as environmentally friendly and sustainable material for catalytic applications.