Many Gram-negative bacteria coordinate their gene expression via quorum sensing (QS) mediated by small diffusible autoinducer molecules such as Acyl Homoseriene Lactones (AHL). The degradation of AHLs or quorum quenching (QQ) imparts less selection pressure on the target organisms leading to a possible alternative to antimicrobial agents and traditional biofilm control methods. Here, a novel strain of Bacillus velezensis, strain PM7, exhibiting extracellular quorum quenching (QQ) activity against Gram-negative bacteria has been isolated. Analytical studies of the AHL degradation using LC-MS as well as bioreporters revealed the mechanism of QQ as homoserine lactone ring hydrolysis. Using molecular techniques, the presence of an aiiA homologues gene, specific for acyl homoserine lactonase enzyme, was confirmed in the bacterium. A biofilm inhibitory activity in the range of 36.9 to 77.4% was achieved by the PM7 against three different Gram-negative bacteria. Moreover, a significant reduction (p < 0.05) in the quorum-sensing controlled traits such as violacein production in Chromobacterium violaceum (73%), swarming motility and prodigiosin production (67.2%) in Serratia marcescens, exopolysaccharide production (97.9%) in Pseudomonas aeruginosa, was also observed. The extracellular and broad-spectrum lactonase of this novel strain can be beneficial for its use in QQ applications.