Natural dyeing is an eco-friendly approach for the dyeing of different textile materials. The natural dyes can be obtained from various sources. Neem, a widely known medicinal tree, is one of them. In this study, neem leaves were used to dye cotton-viscose blended fabrics (CVFs); however, the shade of the dyed sample was very uneven. Therefore, AgNPs synthesized from neem leaf extract were utilized, resulting in perfect evenness in the dyeing process. The effectiveness of the treatment was evaluated through morphological, thermal, structural, and functional analyses. For selecting optimum parameters such as ideal silver nitrate concentration, leaf extract amount, temperature, and immersion time, a Taguchi orthogonal array was used. The process was optimized using a Taguchi orthogonal array, identifying 1 mM AgNO3, 0.32 mL leaf extract, 70 °C temperature, and 20 min immersion as optimal parameters. The treated fabrics exhibited enhanced color fastness to washing, perspiration, and saliva, with scores of 3/4 on the color change grey scale and up to 4/5 on the staining scale. The treated, evenly dyed fabrics using natural dyes were shown antibacterial properties, better thermal stability, and reasonable color fastness to wash, perspiration, and saliva on both the color change grey scale and staining scale. The AgNPs-treated fabrics demonstrated significant antibacterial activity, achieving 58 % reduction against Staphylococcus aureus (Gram-positive) and 36 % against Escherichia coli (Gram-negative) bacteria. Hence, this study proves that AgNPs-induced neam-extracted natural dyes applied on CVFs not only produce a simple dyed fabric but also a functional fabric belonging to antimicrobial properties. The outcome of this work may provide promising solutions for researchers in this field and could potentially be applied to the textile and apparel industries worldwide.