MoS2 sheets are decorated by silver nanoparticles of size 10-12 nm. Localized holes are generated in Ag 4d levels carrying a magnetic moment due to the charge transfer effect at the interface and formation of Ag-S bonds. Temperature-dependent charge transport shows a metal-insulator (M-I) transition; the metallic phase is supported by the transition from negative to positive magnetoresistance and enhanced polarizability near the M-I transition. Observed ferromagnetism arises due to dominant coupling among the spins of localized holes in Ag nanoparticles at lower temperature. Density functional theory calculation is carried out to establish the charge transfer effect. The amount of charge transferred from Ag to MoS2 is evaluated from Bader charge analysis and the temperature effect is verified by a Nosé thermostat with the NVT ensemble method.