The Kosakonia cowanii Cp1 strain was isolated from seeds of Capsicum pubescens R. & P. cultivated in Michoacan, Mexico. Genetic and ecological role analyses were conducted for better characterization. The results show that genome has a length of 4.7 Mbp with 56.22% G + C and an IncF plasmid of 128 Kbp with 52.51% G + C. Furthermore, pathogenicity test revealed nonpathogenic traits confirmed by the absence of specific virulence-related genes. Interestingly, when fungal inhibitory essays were carried out, the bacterial synthesis of volatile organic compounds (VOCs) with antifungal activity showed that Sclerotinia sp. and Rhizoctonia solani were inhibited by 87.45% and 77.24%, respectively. Meanwhile, Sclerotium rolfsii, Alternaria alternata, and Colletotrichum gloeosporioides demonstrated a mean radial growth inhibition of 52.79%, 40.82%, and 55.40%, respectively. The lowest inhibition was by Fusarium oxysporum, with 10.64%. The VOCs’ characterization by headspace solid–phase microextraction combined with gas chromatography–mass spectrometry (HS-SPME-GC–MS) revealed 65 potential compounds. Some of the compounds identified with high relative abundance were ketones (22.47%), represented by 2-butanone, 3-hydroxy (13.52%), and alcohols (23.5%), represented by ethanol (5.56%) and 1-butanol-3-methyl (4.83%). Our findings revealed, for the first time, that K. cowanii Cp1 associated with C. pubescens seeds possesses potential traits indicating that it could serve as an effective biocontrol.