Pongamia pinnata – a plant used since olden times in Ayurvedic treatment – is reported to have diverse functions including antibacterial, antidiabetic, antineurodegenerative, antiepileptic, antiulcer, etc. In this study, our objective was to prepare silver nanoparticles (AgNPs) by green synthesis mediated by methanolic seed extract of P. pinnata and to determine their antimicrobial and antioxidant potential and wound healing activity. AgNPs were characterized for particle size and shape and for antioxidant potential. Further, the AgNPs were incorporated in a gel. The wound healing activity was investigated using an excision wound healing model in Wistar rats. The AgNP‐loaded gel was applied topically to the wounded rats daily for 30 days. The wound contraction was calculated and histopathological studies of the healed tissues were conducted. Karanjin content of the extract was found to be 349 ± 2.16 mg g−1. Formation of AgNPs was confirmed using transmission and scanning electron microscopies and X‐ray diffraction. AgNPs showed good antioxidant potential and were active against Staphylococcus aureus, Escherichia coli, Bacillus subtilis and Pseudomonas aeruginosa. Significant wound healing activity (p < 0.05) was shown by the AgNP gel as compared to 5% Betadine ointment. Thus, the prepared AgNPs have antimicrobial and wound healing effects that may be useful in treatment of topical infections especially in wounds.