Silver nanoparticles (AgNPs) are widely used in commercial products because of their excellent antimicrobial activity. Entrance of AgNPs and its released Ag ions (Ag+) into wastewater treatment plants could harm ammonia oxidation (AO) process resulting in environmental problems. This study investigated inhibitory kinetics and mechanism of AO from nitrifying sludge influenced by AgNPs and Ag+. The findings demonstrated that AgNPs and Ag+ adversely influenced on AO. Silver ions were more toxic to AO than AgNPs, which was indicated by the lower inhibitory constant (Ki) of 0.29 mg/L compared to that of AgNPs (Ki of 73.5 mg/L). Over the experimental period of 60 h, AgNPs at 1, 10, and 100 mg/L released Ag+ in the average concentrations of 0.059, 0.171, and 0.503 mg/L, respectively. Silver nanoparticles of 1–100 mg/L inhibited AO by 45–74%, whereas Ag+ of 0.05–0.50 mg/L inhibited AO by 53–94%. This suggested that the AgNP toxicity mainly derived from the liberated Ag+. Scanning electron microscopy results revealed that AgNPs attached on microbial cell surfaces, and both AgNPs and Ag+ induced cell morphological change from rod shape to shorter rod shape. Transmission electron microscopy showed that AgNPs and Ag+ diminished the thickness of the outer layer and reduced the density of internal parts of the exposed microbial cells, which could be the reasons for the morphology change. Live/dead results also confirmed that AgNPs and Ag+damaged membrane integrity of cells in the nitrifying sludge. This study suggested that the primary mechanism for toxicity of AgNPs was the liberation of Ag+ and then both of silver species caused cell death.