Rice (Oryza sativa) is a major crop in much of the developing world where disease management using pesticides is not economically practical nor environmentally safe. The identification of biocontrol agents therefore presents a useful alternative. Here, we have screened bacterial strains isolated from the rhizosphere of rice plants, and identified a number of these that exhibit antagonistic activity towards the fungal pathogen, Rhizoctonia solani, the causative agent of rice sheath blight disease. Antagonism was strongly correlated with the quantity of siderophores produced by individual strains, and was increased under iron-limiting conditions. Selected high-siderophore-producing strains Bacillus subtilis SPS2, Bacillus cereus Z2-7, Enterobacter sp. SPR7 and Aeromonas hydrophilla BPS10 were found to promote the growth of rice plants, possibly via the solubilisation of soil phosphates, nitrogen fixation and the production of phytohormones. These same plant growth promoting rhizobacteria (PGPR) also conferred resistance against sheath blight disease, which resulted in significant yield increases in infected plants. A consortium of these selected strains was especially effective in both growth promotion and disease suppression, and generally performed better than treatment with the fungicide, benlate. Molecular analysis indicated that the PGPR strains tested enhanced expression of chitinases, peroxidases and glucanases in rice, and may therefore activate induced systemic resistance in this plant species. Our work has identified a series of rhizobacterial strains able to promote growth and provide effective resistance against sheath blight disease in rice and which therefore have potential for application as biocontrol agents in agriculture.