Synthesis and characterization of a novel biofungicide encapsulated in nanoscale liposome particles (referred as nanobiofungicide) and its antifungal activity against Fusarium spp. are described. The nanobiofungicide was synthesized by encapsulating ethanol crude extract from plant growth-promoting bacteria (PGPB) into nanoscale polymerized liposomes, and the nanobiofungicides were characterized through UV–vis spectroscopy, atomic force microscopy (AFM), and transmission electron microscopy (TEM). TEM and UV–vis measurements confirmed encapsulation of biofungicides in nanoliposomes. Whereas nanoliposomes and PGPB crude extract were found to be ineffective against three fungi investigated in studies, in vitro growth inhibition assays revealed that the nanobiofungicide can inhibit 66 ± 3% mycelial growth of Fusarium oxysporum f.sp. cubense Tropical Race 1 (Foc TR1). It also effectively inhibited 44 ± 4% of Fusarium oxysporum f.sp. cucumerinum (Focu). Inhibitory effects of nanobiofungicide were modest (19 ± 2%) against Fusarium oxysporum f.sp. lycopersici (Fol) mycelial growth. On the basis of preliminary results, the nanobiofungicide showed an effective inhibitory effect against Foc TR1 and Focu. The optimization of nanobiofungicide is potentially a viable alternative biocontrol option for controlling Fusarium spp. Possible modes of an inhibition mechanism of nanobiofungicides against fungi are also discussed.