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The present study was carried out to analyze the potential of fungi isolated from the rhizosphere of soybean, brinjal, tomato, and potato plants. The density of fungi varied in the pot soil and rhizosphere after <i>Paecilomyces formosus</i> MD12 treatment. The <i>P. formosus</i> MD12 population was 6.3 ± 0.13 × 10⁴ CFU g⁻¹ in the pot planted with brinjal, and the population increased in the rhizosphere (6.72 ± 0.41 × 10⁴ CFU g⁻¹). <i>P. formosus</i> MD12 was cultured in the production medium, and the supernatant was used for egg inhibition studies on a root-knot nematode parasite, <i>Meloidogyne incognita</i>. It was revealed that maximum egg inhibition (94.7 ± 6.2%) was obtained at 100% concentration of extract. The culture supernatant from <i>P. formosus</i> MD12 affected the development of <i>M. incognita</i> juvenile, and the mortality rate was maximum after 96 h (95 ± 6%). Mortality was reduced when treated with 25%, 50%, and 75% supernatant. At 1 × 10⁷ mL⁻¹ of spore suspension, we found reductions of 71.6 ± 3.3% nematode populations in the soil, 60.7 ± 2.2% from the root, and 63.6 ± 2.4% egg mass compared with the control in the pot experiment. The culture supernatant applied at the 10% level showed a maximum mean reduction of the nematode population in roots (72.4 ± 2.2%), soil (77.9 ± 2.5%), and egg masses (73.2 ± 1.5%), respectively. The presence of <i>P. formosus</i> MD12 in a soil environment could antagonize nematode parasites and improve soil amendment. The <i>P. formosus</i> MD12 strain showed good biocontrol ability against the root-knot nematode, <i>M. incognita</i>, under in vitro and green house experimental condition.