Organically modified silver nanoparticles were prepared by biosynthetic route induced by stem latex of a medicinally important plant, Euphorbia nivulia. The reduction and stabilization is assisted by certain peptides and terpenoids present within the latex. The aqueous formulation of latex capped silver nanoparticles (LAgNPs) being completely free of toxic chemicals can be directly used for administration/in vivo delivery of nanoparticles. The in vitro cytotoxicity evaluation of the latex capped nanoparticles was carried out using human lung carcinoma cells (A549) by MTT cell viability assay. Further, possible cytotoxic mechanisms were evaluated using various biomarkers for cytotoxicity and oxidative stress viz. extracellular lactate dehydrogenase (LDH) release, reactive oxygen species (ROS) generation, intracellular reduced glutathione (GSH), malondialdehyde (MDA), superoxide generation and acridine orange/ethedium bromide staining. It can be concluded from the present study that LAgNP formulation is toxic to A549 cells in a dose dependent manner. Thus plant latex solubilizes the AgNPs in water and acts as a biocompatible vehicle for transport of AgNPs to tumor/cancer cells.