This study investigated the impact of lime stabilization on the fate and transformation of AgNPs. It also evaluated the changes in the population and diversity of the five most relevant bacterial phyla in soil after applying lime-stabilized sludge containing AgNPs. The study was performed by spiking an environmentally relevant concentration of AgNPs (2 mg AgNPs/g TS) in sludge, applying lime stabilization to increase pH to above 12 for two hours, and applying lime-treated sludge to soil samples. Transmission electron microscopy (TEM) and energy-dispersive X-ray spectroscopy (EDS) were used to investigate the morphological and compositional changes of AgNPs during lime stabilization. After the application of lime stabilized sludge to the soil, soil samples were periodically analyzed for total genomic DNA and changes in bacterial phyla diversity using quantitative polymerase chain reaction (qPCR). The results showed that lime treatment effectively removed AgNPs from the aqueous phase, and AgNPs were deposited on the lime molecules. The results revealed that AgNPs did not significantly impact the presence and diversity of the assessed phyla in the soil. However, lime stabilized sludge with AgNPs affected the abundance of each phylum over time. No significant effects on the soil total organic carbon (TOC), heterotrophic plate count (HPC), and percentage of the live cells were observed.