In a recent report, we have presented layer-by-layer (LBL) assembly of a biomimetic nanostructured composite from montmorillonite clay nanosheets and (poly(diallylmethyl ammonium chloride (Nature Materials, 2003, 2, 413). The structure, deformation mechanism, and mechanical properties of the material are very similar to those of natural nacre and lamellar bones. This fact prompts further investigation of these composites as potential bone implants. LBL assembly affords preparation of multifunctional composites and here we demonstrate that not only mechanical strength, but also antibacterial activity can be introduced in these implantable materials by alternating clay layers with starch-stabilized silver nanoparticles. The resulting composite showed excellent structural stability with no detectable levels of silver lost over one month period. Evaluation of antibacterial properties showed almost complete growth inhibition of E. coli over 18 hours period. For the first time, the actual amount of silver eluted from the LBL composites and responsible for the antimicrobial properties was determined to be 0.5-3.0 ėg/L. This concentration of silver did not prevent the growth of the mammalian tissue cultures. The LBL composite has shown biocompatibility with human osteoblast cell line.