The demand of functional foods is on the rise, and researchers are trying to develop nutritious dairy products by using well-characterized strains of bacteria. In this study, we identified locally isolated strains of Lactobacillus fermentum from Bubalus bubalis (Nilli Ravi buffalo) milk and evaluated their potential as probiotics in food products like fermented milk. Fifteen Lactobacillus strains were initially isolated, and only four strains (NMCC-2, NMCC-14, NMCC-17, and NMCC-27) were examined for morphological and biochemical characterizations due to their ability of gas production in Durham tubes. Moreover, these strains were selected for further probiotic characterizations due to their extreme morphological resemblance with lactic acid bacteria for their antimicrobial activity, enzymatic potential, autoaggregation capability, hydrophobicity, and acid and bile tolerance. All selected isolates showed significant probiotic potential. However, NMCC-14 and NMCC-17 strains showed maximum probiotic potential. The isolates (NMCC-2, NMCC-14, NMCC-17, and NMCC-27) were identified as Lactobacillus fermentum utilizing 16S rRNA gene sequencing. The in vivo safety study of NMCC-14 (dose: 1010 CFU/day/mice; 21 days, orally) showed no histological dysfunctions in a mouse model. Pathogenic bacterial enzymes reduced the beneficial bacterial load in the host gastrointestinal tract. These results suggest that the NMCC-14 strain is safe and can be potentially used as a probiotic. Moreover, fermented milk was prepared by using the NMCC-14 strain. The results revealed that NMCC-14 strain-based fermented milk had significantly (p < 0.05) higher protein content (4.4 ± 0.06), water-holding capacity (WHC), and dynamic viscosity as compared to non-fermented milk. The results suggest that L. fermentum NMCC-14 is safe and nontoxic; hence, it can be a beneficial supplement to be used for the development of dairy products to be subjected to further clinical testing.