Silver nanoparticles are known to have inhibitory antimicrobial properties. In this letter, we report the synthesis of silver nanoparticles by using biocompatible, water soluble polymer through polyol method. Optical absorption spectrum of the prepared particles shows an absorption peak around 433 nm which is because of Surface Plasmon Resonance (SPR) of silver nanoparticles. Fourier transform infrared (FTIR) studies were done to identify the interaction of the nanoparticle and polymer. Transmission Electron Microscopic (TEM) studies confirm that the prepared particles are ~ 100 nm in size. Antifungal activity was studied through standard disk diffusion method. Studies show the prepared particles are potential candidates for the antifungal activity.