Several materials such as silver are used to enhance graphene oxide (GO) sheets antimicrobial activity. However, these toxic materials decrease its biocompatibility and hinder its usage in many biological applications. Therefore, there is an urgent need to develop nanocomposites that can preserve both the antimicrobial activity and biocompatibility simultaneously. This work highlights the importance of functionalisation of GO sheets using Polyvinylpyrrolidone (PVP) and decorating them with silver nanoparticles (AgNPs) in order to enhance their antimicrobial activity and biocompatibility at the same time. The structural and morphological characterisations were performed by UV-Visible, Fourier transform infrared (FTIR), and Raman spectroscopic techniques, X-ray diffraction (XRD), and high-resolution transmission electron microscopy (HR-TEM). The antimicrobial activities of the prepared samples against Staphylococcus aureus, Pseudomonas aeruginosa, and Candida albicans were studied. The cytotoxicity of prepared materials was tested against BJ1 normal skin fibroblasts. The results indicated that the decoration with AgNPs showed a significant increase in the antimicrobial activity of GO and FGO sheets, and functionalisation of GO sheets and GO-Ag nanocomposite with PVP improved the cell viability about 40 and 35%, respectively.