Escherichia coli is used for eco-friendly extra cellular synthesis of metallic silver and gold nanoparticles. This is achieved by reducing AgNO3 and HAuCl4 solutions respectively under ambient conditions by using the extra cellular protein produced by the microorganism. The proteins act as reducing as well as capping agent. The nanoparticles were characterized by UV-Visible spectroscopy, X-Ray diffraction (XRD), Fourier transform infra-red spectroscopy (FT-IR) and transmission electron microscopy (TEM). Both the nanoparticles are polydisperse. Gold particles predominantly exhibit flat and plate like morphology. These nanoparticles are stable in water for more than three months. The silver nanoparticles are able to inhibit the growth of several Gram positive and negative microorganisms, and the gold nanoparticles exhibit good antioxidant activity. This approach is simple, does not use toxic chemicals and is amenable for large scale commercial production.