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Abstract Bacillus sp. BSp.3/aM, a beneficial rhizobacteria, was analyzed for the ability to improve plant health of chili by suppressing anthracnose disease. In the dual culture assay, the bacterium Bacillus sp. BSp.3/aM was found inhibitory to Colletotrichum capsica (6 mm). Further, upon seed priming, it reduced the seed-borne incidence of C. capsici (2%) and improved seedling vigor (1374 ± 7.15 vigor index) and germination (98 ± 0.57 %) of chili seedlings. Under greenhouse conditions, seed priming resulted in reducing the anthracnose disease incidence up to 20%. Induction of resistance against invading pathogen is through enhancing the activities of defense-related enzymes and higher accumulation of phenolic compounds in the host plant. The activity of phenylalanine ammonia-lyase (PAL; 95 units) was more at 48 hpi; peroxidase (POX; 6.49 units) at 24 hpi; polyphenol oxidase (PPO; 5.81 units) at 24 hpi and lipoxygenase (LOX; 9.9units) at 24 hpi. Maximum accumulation of the phenolics and chitinase accumulation was observed in BSp.3/aM + pathogen treated seedlings 120 hpi (94.7 μg/g tissue) and at 96 hpi (9.36 units), respectively. Thus, increased activities of defense-related enzymes (PAL, POX, PPO, LOX, and chitinase) correlated well with the decreased anthracnose incidence. Induced systemic resistance (ISR) mediated by PGPR was due to the upregulation of defense-related enzymes and by the accumulation of phenolic compounds.