In the current study, cell-free exudates of the ciliated protozoan Tetrahymena thermophila were shown to progressively convert silver nitrate to silver nanoparticles (Ag NPs) under illumination at ambient temperature. The formation of Ag NPs in the reaction mixture was evidenced by gradual colour changes, appearance of a specific absorbance peak (420–450 nm) and visualization using scanning electron microscopy coupled to an energy-dispersive X-ray spectrometer. After 2 h of incubation the mean hydrodynamic size of the Ag NPs was 70 nm. Seven days of incubation resulted in larger agglomerates and a significant decrease in silver toxicity to T. thermophila, accompanied by about 100-fold reduction in the silver ion concentration. Protein analysis indicated an extensive extracellular protein binding by the Ag NPs formed in the protozoan exudates. As protozoa are important components in wastewater treatment, their ability to sequester silver ions into a less bioavailable and less toxic form of silver (e.g. NPs) may be one of the adaption mechanisms of ciliate survival in contaminated environments.