The present study was conducted to evaluate the potential of rice rhizosphere associated antagonistic bacteria for growth promotion and disease suppression of bacterial leaf blight (BLB). A total of 811 rhizospheric bacteria were isolated and screened against 3 prevalent strains of BLB pathogen Xanthomonas oryzae pv. oryzae (Xoo) of which five antagonistic bacteria, i.e., Pseudomonas spp. E227, E233, Rh323, Serratia sp. Rh269 and Bacillus sp. Rh219 showed antagonistic potential (zone of inhibition 1-19 mm). Production of siderophores was found to be the common biocontrol determinant and all the strains solubilized inorganic phosphate (82-116 μg mL-1) and produced indole acetic acid (0.48-1.85 mg L-1) in vitro. All antagonistic bacteria were non-pathogenic to rice, and their co-inoculation significantly improved plant health in terms of reduced diseased leaf area (80%), improved shoot length (31%), root length (41%) and plant dry weight (60%) as compared to infected control plants. Furthermore, under pathogen pressure, bacterial inoculation resulted in increased activity of defense related enzymes including phenylalanine ammonia-lyase and polyphenol oxidase, along with 86% increase in peroxidase and 53% increase in catalase enzyme activities in plants inoculated with Pseudomonas sp. Rh323 as well as co-inoculated plants. Bacterial strains showed good colonization potential in the rice rhizosphere up to 21 days after seed inoculation. Application of bacterial consortia in the field resulted in an increase of 31% in grain yield and 10% in straw yield over non-inoculated plots. Although, yield increase was statistically non-significant but was accomplished with overall saving of 20% chemical fertilizers. The study showed that Pseudomonas sp. Rh323 can be used to develop dual-purpose inoculum which can serve not only to suppress BLB but also to promote plant growth in rice.