Microbial nanotechnology is an emerging field that leverages the biosynthetic capabilities of microorganisms to produce nanomaterials with unique physicochemical properties. Emphasizing the advantages of eco-friendly and sustainable processes, this chapter explores the concept of “microbial alchemy” that how bacteria, fungi, algae, and other microorganisms act as natural “nanofactories,” utilizing enzymatic and non-enzymatic pathways for nanoparticle synthesis. Furthermore, the potential applications of microbially synthesized nanomaterials such as biomedical applications, including antimicrobial activity, cancer therapy, drug delivery, bioimaging, and biosensors, alongwith environmental remediation applications are also discussed. Despite their potential applications, challenges such as optimizing yield, ensuring safety, and navigating regulatory hurdles persist. To overcome these issues, advancements in genetic engineering and strain optimization further enhances the feasibility of microbial nanomaterials as a sustainable solution to global biomedical and environmental challenges. Overall, this chapter highlights the transformative potential of microbial nanotechnology in driving eco-friendly solutions to address pressing challenges in these fields.