In this paper we report on a facile, cost effective and environmental friendly green synthesis method of gold and silver nanoparticles (NPs) by using quercetin as reducing agent. The obtained NPs were characterized by transmission electron microscopy (TEM), energy dispersive spectroscopy (EDS), dynamic light scattering (DLS) and UV‐Vis spectroscopy and parameters such as pH, ionic strength and temperature, effectively affecting shape and size of NPs, have been carefully studied and optimized. The obtained results showed that the synthesized NPs were circular in shape with an average diameter of 5 and 8 nm for the AuNPs and the AgNPs, respectively. The “green” NPs, showing increased electroactive areas (A_EA) and electronic transfer rate constants (k⁰), were successively used to fabricate a novel third generation lactose biosensor based on cellobiose dehydrogenase from Trametes villosa (TvCDH). The TvCDH/AuNPs based lactose biosensor revealed the best results showing very efficient DET and a detection limit for lactose of 3.5 mM, a large linear range from 10 to 300 mM, a high sensitivity (5.4 μA mM⁻¹ cm⁻²) and long‐term stability.