More food is needed to meet the demand of the global population, which is growing continuously. Chemical fertilizers have been used for a long time to increase crop yields, and may have negative effect on human health and the agricultural environment. In order to make ongoing agricultural development more sustainable, the use of chemical fertilizers will likely have to be reduced. Microbial fertilizer is a kind of nutrient-rich and environmentally friendly biological fertilizer made from plant growth-promoting bacteria (PGPR). Microbial fertilizers can regulate soil nutrient dynamics and promote soil nutrient cycling by improving soil microbial community changes. This process helps restore the soil ecosystem, which in turn promotes nutrient uptake, regulates crop growth, and enhances crop resistance to biotic and abiotic stresses. This paper reviews the classification of microbial fertilizers and their function in regulating crop growth, nitrogen fixation, phosphorus, potassium solubilization, and the production of phytohormones. We also summarize the role of PGPR in helping crops against biotic and abiotic stresses. Finally, we discuss the function and the mechanism of applying microbial fertilizers in soil remediation. This review helps us understand the research progress of microbial fertilizer and provides new perspectives regarding the future development of microbial agent in sustainable agriculture.