Silver nanoparticles (Ag-NPs) readily transform in the environment, which modifies their properties and alters their transport, fate, and toxicity. It is essential to consider such transformations when assessing the potential environmental impact of Ag-NPs. This review discusses the major transformation processes of Ag-NPs in various aqueous environments, particularly transformations of the metallic Ag cores caused by reactions with (in)organic ligands, and the effects of such transformations on physical and chemical stability and toxicity. Thermodynamic arguments are used to predict what forms of oxidized silver will predominate in various environmental scenarios. Silver binds strongly to sulfur (both organic and inorganic) in natural systems (fresh and sea waters) as well as in wastewater treatment plants, where most Ag-NPs are expected to be concentrated and then released. Sulfidation of Ag-NPs results in a significant decrease in their toxicity due to the lower solubility of silver sulfide, potentially limiting their short-term environmental impact. This review also discusses some of the major unanswered questions about Ag-NPs, which, when answered, will improve predictions about their potential environmental impacts. Research needed to address these questions includes fundamental molecular-level studies of Ag-NPs and their transformation products, particularly Ag2S-NPs, in simplified model systems containing common (in)organic ligands, as well as under more realistic environmental conditions using microcosm/mesocosm-type experiments. Toxicology studies of Ag-NP transformation products, including different states of aggregation and sulfidation, are also required. In addition, there is the need to characterize the surface structures, compositions, and morphologies of Ag-NPs and Ag2S-NPs to the extent possible because they control properties such as solubility and reactivity.