The successful preparation of silver nanoparticles (AgNPs) using Sapindus mukorossi (soapnut) fruit pericarp extract is ecofriendly and low-cost. The natural soapnut is nothing but a surfactant property that acts as a stabilizing and capping agent. The prepared AgNPs are employed to investigate the sensing of metal ions and antibacterial action. Due to a unique combination of high electrical conductivity, Surface Plasmon Resonances (SPR) and efficient electron transfer properties of AgNPs, they attract substantial attention for sensor technology. The identification of 24 distinct compounds of soapnut extract through GC-MS analysis suggest the complex interplay of phytochemicals for AgNPs. The distinct SPR band of AgNPs by soapnut extract stabilized, obtained at 465 nm indicates silver nanoparticles are successfully formed. A crystallite size of 16.45 nm, face-centred cubic structure and particle size of 20 nm are confirmed by XRD analysis. The TEM image represents the silver nanoparticles are in spherical shape. The zeta potential of -22.0 mV, collectively indicates the formation of small and moderately stable silver nanoparticles. The developed method using soapnut extract stabilized green AgNPs exhibited a notable ability to sense selectively Fe3+ ions and does not sense the Mg2+, Ni2+, and Cu2+ions from water samples. The significant antibacterial activity study of silver nanoparticles shows the zone of inhibition (ZOI)=23 and 19 mm for Staphylococcus aureus and Escherichia coli, respectively.