The growing use of gold nanoparticles and their conjugates in medical field for a number of purposes specially in cancer studies emphasizes on the method employed for their synthesis. The existing chemical methods of synthesis require high temperatures and also result in environmental pollution by the usage of toxic chemicals. The present study demonstrates the synthesis of gold nanoparticles using endophytic bacterium Bacillus cereus isolated from the medicinal plant Justicia beddomei. Initial synthesis of the nanoparticles was observed by the color change from pale yellow to pink which was later confirmed by the UV-vis spectra that showed a characteristic peak at 536 nm. The size of the synthesized gold nanoparticles obtained by TEM analysis revealed the size to be in the range of 16 – 40 nm. The three dimensional view of the gold nanoparticles was visualized by AFM analysis. EDX studies confirmed the presence of elemental gold in the nanoparticle solution. Further these gold nanoparticles were stabilized using a biopolymer chitosan to prevent aggregation of the nanoparticles. This functionalization of the nanoparticles is key step in their usability in various medical applications.