We report here the use of dendrimer-stabilized silver nanoparticles (Ag DSNPs) for the highly sensitive and selective colorimetric detection of mercury ions (Hg²⁺) in aqueous solution. In this study, amine-terminated generation 5 poly(amidoamine) dendrimers were employed as stabilizers to complex Ag⁺ ions for the subsequent reductive formation of colloidally stable Ag DSNPs with a mean size of 12.1 nm. The redox reaction between Ag DSNPs and Hg²⁺ was confirmed by UV-Vis spectroscopy, transmission electron microscopy, and dynamic light scattering. We show that the size of the Ag DSNPs is decreased after interaction with Hg²⁺ and the yellow color of the Ag DSNP solution is gradually decolorized as a function of the concentration of Hg²⁺. The Hg²⁺ concentration-dependent changes in the intensity and the shift of the surface plasmon resonance peak of the Ag DSNPs at 398 nm were used to detect Hg²⁺ via two different correlations. In both correlations, Hg²⁺ was able to be detected in aqueous solution in a concentration range of 10 ppb to 10 ppm. Finally, the use of Ag DSNPs for Hg²⁺ detection was found to be specific to Hg²⁺. Our results clearly indicate that Ag DSNPs could be used as an efficient probe for the colorimetric sensing of Hg²⁺ in environmental water samples.