During the last decade, metal nanoparticles (MtNPs) have gained immense popularity due to their characteristic physicochemical properties, as well as containing antimicrobial, anti-cancer, catalyzing, optical, electronic and magnetic properties. Primarily, these MtNPs have been synthesized through different physical and chemical methods. However, these conventional methods have various drawbacks, such as high energy consumption, high cost and the involvement of toxic chemical substances. Microbial flora has provided an alternative platform for the biological synthesis of MtNPs in an eco-friendly and cost effective way. In this article we have focused on various microorganisms used for the synthesis of different MtNPs. We also have elaborated on the intracellular and extracellular mechanisms of MtNP synthesis in microorganisms, and have highlighted their advantages along with their challenges. Moreover, due to several advantages over chemically synthesized nanoparticles, the microbial MtNPs, with their exclusive and dynamic characteristics, can be used in different sectors like the agriculture, medicine, cosmetics and biotechnology industries in the near future.