Non toxic zinc oxide (ZnO) nanoparticles were synthesized using a novel soil fungus, Aspergillus terreus VIT 2013. Production of these particles in fungal filtrate was observed by a change in colour from yellow to whitish yellow, along with a white precipitate which settled to the bottom of the flasks after three days. For confirming their presence through UV spectral studies, the filtrate was scanned from 200 to 500nm and a strong peak was observed at 388nm. X-ray diffraction analysis indicated peaks at (100), (002), (102), (110) and (112) corresponding to the hexagonal structure of ZnO nanoparticles. The atomic force microscopy images showed the presence of spherically shaped ZnO nanoparticles in aggregated form. Fourier transform infrared spectrum (FTIR) revealed the presence of primary and secondary amines which probably aids in particle stabilisation. The highlight of the study was that the particles showed no antibacterial activity against normal skin flora, certain MTCC isolates and some fungal pathogens. Overall analysis of results revealed that the mycobiosynthesis of ZnO nanoparticles is a slow redox process, which may involve extracellular oxidase and reductase enzymes, synthesised by a new fungus, viz., Aspergillus terreus VIT 2013. Further, these particles are non toxic and hence can be used in the formulation of skin care products. Their applications can also be extended to other industries as disposal will not present any ecological imbalance.