The development of multifunctional nanocomposite materials is of great interest for various biomedical applications. A popular approach to produce tailored nanocomposites is to incorporate functional nanoparticles into hydrogels. Here, a benign atmospheric pressure microplasma synthesis approach has been deployed for the synthesis of metal and alloy NPs in-situ in a poly (vinyl alcohol) hydrogel. The formation of gold, silver, and gold-silver alloy NPs was confirmed via spectroscopic and microscopic characterization techniques. The properties of the hydrogel were not compromised during formation of the composites. Practical applications of the NP/PVA nanocomposites has been demonstrated by anti-bacterial testing. This establishes AMP processing as a viable one-step technique for the fabrication of NP/hydrogel composites, with potential multifunctionality for a range of biomedical applications.