The study is aimed at detection of hydrogen peroxide (H2O2) using Acacia lignin mediated silver nanoparticles (AGNPs). The synthesis of AGNPs was achieved at conditions optimized as, 3ml of 0.02% lignin and 1mM silver nitrate incubated for 30min at 80°C and pH 9. Initial screening of AGNPs was performed by measuring the surface plasmon resonance peak at 410–430nm using UV–vis spectrophotometer. Transmission electron microscopy, atomic force microscopy, X-ray diffraction and particle size analysis confirmed the spherical shaped face centered cubic structure and 10–50nm size of AGNPs. The infrared spectroscopy study further revealed that the active functional groups present in lignin were responsible for the reduction of silver ions (Ag+) to metallic silver (Ag0). Lignin stabilized silver nanoparticles showed good sensitivity and a linear response over wide concentrations of H2O2 (10−1 to 10−6M). Further, the in vitrocytotoxicity activity of the lignin mediated AGNPs (5–500μg/ml) demonstrated toxicity effects in MCF-7 and A375 cell lines. Thus, lignin stabilized silver nanoparticles based optical sensor for H2O2 could be potentially applied in the determination of reactive oxygen species and toxic chemicals which further expands the importance of lignin stabilized silver nanoparticles.