In the search of effective drought‐alleviating and growth‐promoting phyllosphere bacteria, a total of 44 bacterial isolates were isolated from the leaf surface of drought‐tolerant rice varieties, Mattaikar, Nootripattu, Anna R(4), and PMK3, and screened for their abiotic stress tolerance by subjecting their growth medium to temperature, salinity, and osmotic stress. Only eight isolates were found to grow and proliferate under different abiotic stress conditions. These isolates were identified using 16S ribosomal DNA gene sequence and submitted to the NCBI database. All the bacterial isolates were identified as Bacillus sp., except PB24, which was identified as Staphylococcus sp., and these isolates were further screened for plant growth‐promoting (PGP) traits such as IAA production, GA production, ACC deaminase activity, and exopolysaccharide production under three different osmotic stress conditions adjusted using polyethylene glycol (PEG 6000). Additionally, mineral solubilization was measured under the normal condition. Bacillus endophyticus PB3, Bacillus altitudinis PB46, and Bacillus megaterium PB50 were found to have multifarious PGP traits. Consecutively, the performance of an individual strain to improve the plant growth was investigated under the osmotic stress (25% PEG 6000) and nonstress condition by inoculating them into rice seeds using hydroponics culture. Furthermore, the drought‐alleviating potency of bacterial strains was assessed in the rice plants using pot experiment (−1.2 MPa) through bacterial foliar application during the reproductive stage. Finally, as a result of seed inoculation and foliar spray, the application of B. megaterium PB50 significantly improved the plant growth under osmotic stress, protected plants from physical drought through stomatal closure, and improved carotenoid, total soluble sugars, and total protein content. Metabolites of PB50 were profiled under both stress and nonstress conditions using gas chromatography–mass spectroscopy.