Green synthesis is an eco-friendly approach of nanoparticles fabrication gaining momentum among researches. Nanoparticles are used immensely, due to its small size, physical properties, orientation, which can apparently change the performance of any other material when in proximity. Antibacterial, antioxidant, antifungal, antiviral, anti-inflammatory activities of several nanoparticles capable of wound healing make it a appropriate module for wound dressing materials. Silver nanoparticles (SNPs) are recognized as well established antimicrobial and antiseptic agents, thus considering it as a promising candidate for wound healing process and other applications. Here we report an effective and biological approach of a novel thin film preparation based on polyvinyl alcohol (PVA) with SNPs generated within matrix using leaf extract of Aloe vera as a bioreducing agent. Successful incorporation of SNPs into the polymer matrix, which was confirmed by NTA analysis, TEM, SEM. The characterization results revealed that SNPs were found in range of 10-40 nm. Evaluation of antimicrobial activity on Escherichia coli (ATCC 39403), Staphylococcus aureus (ATCC 25923), Klebsiella pneumoniae (clinical isolates), and Candida albicans (diploid fungus) using agar cup and disc diffusion method confirmed effective performance of the PVA-SNPs film. Average ZOI was observed as 3+2mm, 3+2mm, 4+1mm and 4+1mm respectively. Thin film produced is highly biocompatible to HaCat and L929 cell lines for a defined amount and hence can be used as wound dressing materials. The method used in this study is greener, simple, rapid, and cost effective for producing a biocompatible film with profoundly variable applications in food packaging and health care industries.