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Introduction and Aim: The Biosynthesis of Gold nanoparticles (Au NPs) is an eco-friendly, cost effective and nontoxic alternative to chemical and physical methods. In the present study synthesis of Au NPs was performed by using a fungi Penicillium sp. isolated from agriculture soil. Materials and Methods: Fungi was isolated from the agricultural field and inoculated into Sabouraud Dextrose broth and incubated at 28º C in a shaker at 180 rpm for 96 to 120 hours. After incubation, the fungal culture was filtered and centrifuged, obtained fungal cell free extracts treated with 1mM gold salt (HAuCl4). The synthesis of Au NPs was confirmed by UV–visible spectroscopy and particles size was measured using Dynamic Light Scattering (DLS). Haemolytic assay of Au NPs was carried out using Chicken RBCs and results measured at 540 nm in UV-visible spectrophotometer. To study catalytic activity, Bromothymol blue (BB) was subjected to reduction by using sodium borohydride (NaBH4, 5.28X10-2 M) in the presence of Au NPs. Then the color change was monitored by visual observation. Results: The synthesis of Au NPs was preliminary observed by a color change from yellow to purple and confirmed by a peak at 560 nm using a UV–visible spectroscopy. The DLS analysis showed that the Au NPs were poly-dispersed and size ranges from 130 to 150 nm. The biosynthesised Au NPs was studied for their biocompatibility and dye degradation properties. Conclusion: The obtained results revealed that biosynthesized Au NPs shows a minimum level of toxicity to chicken erythrocytes and good catalytic activity towards the degradation of hazardous dye bromothymol blue. These nanoparticles could be potentially useful in various applications in medical and environmental fields.