The preset study deals with formulation and development of silver nanoparticles using green approach based on polysaccharides as reducing and stabilizing agent. In this study chitosan stabilized silver nanoparticles were prepared and azathioprine was conjugated with silver nanoparticles to treat the inflammation in rheumatoid arthritis. The azathioprine loaded silver nanoparticles were characterized by UV –Visible Spectrophotometry, FT-IR, Scanning electron microscopy and Zeta potentiometer. The absorption maximaof the silver nanoparticles was 420nm. SEM images of Azathioprine Silver nanoparticles showed spherical particles in the range of 180nm to 220nm. An in vitro drug release study was carried out and percentage drug release was found to be 67.34% at the end of 24 hours for formulation F2. In vitro toxicity of azathioprine loaded silver nanoparticles was studied in 3T3 NIH fibroblast cell line. The formulation plays a dual role, to target the diseased site and to release the drug in a controlled manner and produces synergetic effect to the inflammatory sites.