In recent years, fungi have been shown to produce a plethora of new bioactive secondary metabolites of interest, as new lead structures for medicinal and other pharmacological applications. The present investigation was carried out to study the pharmacological properties of a potent and major bioactive compound: xylaranic acid, which was obtained from Xylaria primorskensis (X. primorskensis) terpenoids in terms of antibacterial activity, antioxidant potential against DPPH & H2O2 radicals and anticancer activity against human lung cancer cells. Due to terpenoid nature, low water solubility and wretched bioavailability, its pharmacological use is limited. To overcome these drawbacks, a novel xylaranic acid silver nanoparticle system (AgNPs) is developed. In addition to improving its solubility and bioavailability, other advantageous pharmacological properties has been evaluated. Furthermore, enhanced anticancer activity of xylaranic acid and its AgNPs due to induced apoptosis were also confirmed by determining the expression levels of apoptosis regulatory genes p53, bcl-2 and caspase-3 via qRT PCR method. This is the first study developing the novel xylaranic acid silver nanoparticle system and enlightening its therapeutic significance with its improved physico-chemical properties and augmented bioactive potential.