The emerging generation of harmful biomedical waste poses significant environmental and public health hazards, and thus, the strategic management of medical waste is a global challenge. In low-income countries, traditional disposal methods such as incineration and landfilling are leading to environmental pollution and raise concerns about antimicrobial resistance (AMR). Recently, nanotechnology has emerged as a sustainable alternative through the utilization of microbe-derived nanoparticles (MDNPs) synthesized by bacteria, fungi, and algae. The unique physicochemical properties like high surface area, biocompatibility, and catalytic potential of MDNPs enable them to act as highly effective in wastewater treatment processes. MDNPs facilitate the enzymatic degradation of plastics, medicines, and heavy metals, leading to biodegradation and detoxification. They also lower pathogen loads in hospital waste so disease doesn’t spread. Moreover, MDNPs function as biosorbents that remove heavy metals and toxic chemicals from medical effluent. MDNPs’ incorporation in the treatment of waste conforms with the principles of green chemistry as an Eco-friendly approach with less impact on the environment. Nonetheless, their large-scale production, stability, and regulatory approval must be overcome for widespread use. More studies on optimizing microbial synthesis and higher yield of nanoparticle are important for integrating the MDNP-based technologies with current waste management facilities which can bring a breakthrough in the management of medical waste treatment and develop a cleaner, safer environment.