Scaffolds fabricated with only chitosan (CS) as base polymer is limited by its fast degradation rate, reduced mechanical strength and diminished bioactivity. To achieve optimal properties suitable for bone tissue engineering, CS based scaffolds are developed by addition of copolymers, nanoparticles, and functional group modifications. In our study, biodegradable composite scaffolds were fabricated by utilizing CS and silver nanoparticles (AgNPs) were in-situ synthesised on CS matrix with no external reducing agent. The scaffold was investigated for its suitability to be employed in bone tissue engineering (BTE) applications. The scaffolds were found to be highly porous and possess the ability of hydration, adsorb proteins and biomineralization. Chelation with silver ions greatly improved the properties of CS scaffolds by controlling swelling and degradation rate. In addition this, the scaffolds were found to exert broad spectrum antibacterial activity. Furthermore, the scaffolds are highly biocompatible and supported the growth of osteoblast. It also promoted osteogenic differentiation by upregulating Runt-related transcription factor 2 (Runx2), Type-1 collagen (Col-I), Alkaline phosphatase (ALP) activity and secreted Osteocalcin (OC) levels. Among the synthesized scaffolds, CS-Ag 1.5 M scaffold was found to be superior and suitable for bone tissue engineering applications.