In this work, the binding behaviour of naringin – a flavonoid with AuNPs is explained by combining experimental and theoretical approaches. We have systematically analysed the effect of temperature and concentration of naringin and gold (Au) in the formation of naringin stabilized Au nanoparticles (N-AuNPs). The interaction of naringin with gold nanoparticles (AuNPs) is investigated by various techniques such as UV-visible spectroscopy, TEM, FT-IR, XRD and gel electrophoresis. These studies indicate that naringin acts as a reducing and stabilizing agent. Further, we have modelled the two side chains of naringin with the functional groups [C₁₀H₇O₂] and [C₆H₅O]⁻, and identified the lowest energy configurations of these groups with AuNPs with the help of density functional theory (DFT). The [C₁₀H₇O₂]–Au₁₃ has higher binding energy than [C₆H₅O]⁻–Au₁₃ and it is attributed to delocalized molecular orbitals in [C₁₀H₇O₂], hence higher charge transfer to the Au₁₃ cluster. On the basis of the resulting structures, we examine the optical properties using time-dependent density functional theory (TDDFT). We observe significant changes in the optical spectra of the representative structures of side chains with the AuNPs. The peak in the spectra of the Vis region of [C₁₀H₇O₂]–Au₁₃ undergoes a shift towards lower wavelength in comparison to [C₆H₅O]⁻–Au₁₃. Natural transition orbitals (NTOs) of hole and particle states of the [C₁₀H₇O₂]–Au₁₃ conjugate system are localized on [C₁₀H₇O₂] and Au₁₃, respectively, whereas for the [C₆H₅O]⁻–Au₁₃ both hole and particle states are localized on the Au₁₃ cluster. These N-AuNPs show their applicability as a sensor for detecting aluminium ions (Al³⁺) in aqueous solution. These NPs are also found to be biocompatible with normal red blood cells and MDAMB-231 breast carcinoma cell lines, as evaluated from hemolysis and cytotoxicity assays. Thus, naringin offers non-toxic and bio friendly N-AuNPs, which are considered to be the best vehicle for drug release and other possible biomedical and sensing applications.