The clinical success of coated implants in executing biological functions inclusive of sustainable drug release and long term antibacterial activity without antibiotics is critical. To this aim, a nanohybrid of silver nanoparticles (AgNPs) cored in polyvinyl alcohol nanocapsules (Ag-PVA NCs) embedded in chitosan (CS) matrix loaded with anti-inflammatory drug naproxen was prepared. The synthesized nanohybrids that were subjected to coatings on (3-aminopropyl)triethoxysilane (APTES) treated titanium (Ti) metal exhibited dual role of excellent inhibition on biofilm formation and sustained drug release. These dual characteristics are achieved mainly based on intrinsic antibacterial property of AgNPs and differential entrapment of drug in PVA polymeric shell of AgNPs and CS matrix. The coatings also demonstrated enhanced mechanical properties with increasing inorganic filler and stress shielding on Ti metal. The biocompatibility tests involving adhesion, proliferation and differentiation of osteoblast cells demonstrated the efficacy of Ag-PVA NCs embedded in CS matrix as a suitable coating material for orthopedic applications.