A time-resolved study of the formation of AuAg alloy nanoparticles during boiling of AgNO3 and HAuCl4 in the presence of sodium citrate has been performed by monitoring the UV-visible spectra of the solutions. This study reveals clear differences with respect to the formation of pure Au particles, and suggests that gold and silver nanoparticles nucleate separately, but lattice rearrangement eventually leads to formation of alloy nanoparticles with the expected composition, which was confirmed by high resolution TEM. Additionally, we studied the chemical reaction of the alloy nanoparticles with NH4OH, observing that part of the Ag atoms get oxidized, but reorganization of the crystal lattice during the reaction prevents full transformation into pure gold nanoparticles. This allows the synthesis of silica-coated bimetallic particles with tailored plasmon resonance between ca. 430 and 520 nm, as well as homogeneous incorporation of the coated alloy nanoparticles within silica gels.