The rhizobacterial strain Jdm2 was isolated from the rhizosphere of the traditional Chinese medicinal herb Trichosanthes kirilowii in Jiangsu province, China, and was identified as Bacillus subtilis. Exposure of cell-free filtrate of the strain to the root-knot nematode Meloidogyne incognita under in vitro conditions caused substantial mortality of the second stage juvenile (J2) and significantly reduced egg hatchability. A greenhouse trial demonstrated that 56 days after treatment with Jdm2, the number of galls associated with M. incognita infection in the tomato (Solanum lycopersicum) roots was significantly reduced compared to controls, and the disease severity of infected plants was lower in treated plants (36%) compared to water control (75%). Consistently, in the field trial, the biocontrol efficacy of Jdm2 reached 69%, 51% and 48% after 30, 60 and 90 days post-transplantation, respectively. As indicated by PCR-DGGE analysis, inoculation with Jdm2 strain had an effect on the bacterial community of the tomato rhizosphere at the first stage, but was not able to imperil the bacterial community stability for long time. The novel bacterial strain Jdm2 enhances plant growth and inhibits nematode activity, and has the potential to be a safe and effective microbial pesticide.