The ability to produce highly pure and crystalline nanoparticles with prescribed surface chemistry is of vital importance as these properties play crucial roles in enhancing the performance of nanoparticle-embedded opto- and nano-electronic devices. In this study, we sought to improve the purity, crystallinity, and surface passivation of silicon nanoparticles as they are produced via spark discharge generation by introducing a hydrogen atmosphere. When pure argon is used as the carrier gas, we find that some particles are oxidized (silicon oxide rather than silicon) due to the trace amounts of oxygen present in the system, and those that are not oxides are often amorphous, as the spark energy is insufficient to produce highly crystalline silicon nanoparticles. When hydrogen is introduced into the chamber, it creates a reducing environment within the spark discharge zone, which effectively reduces the formation of oxide particles. The portion of generated silicon oxide nanoparticles decreases as more hydrogen is introduced into the system. In addition, hydrogen plasma generated from the spark discharge process improved the crystallinity of the produced silicon nanoparticles, and aids passivation of the silicon nanoparticle surface by forming Si-Hx bonds, enhancing their stability during handling in oxygen containing atmosphere. Thus, the presented technique can be used to produce hydrogen-passivated silicon nanoparticles with high purity and crystallinity, and it is expected that these particles can be utilized as quantum dots after size-selection or be incorporated into luminescence devices.