Rhizoctonia solani, the causal agent of banded leaf and sheath blight (BL&SB), poses a significant threat to maize and various crops globally. The increasing concerns surrounding the environmental and health impacts of chemical fungicides have encouraged intensified concern in the development of biological control agents (BCAs) as eco-friendly alternatives. In this study, we explored the potential of 22 rhizobacteria strains (AS1–AS22) isolates, recovered from the grasslands of the Pithoragarh region in the Central Himalayas, as effective BCAs against BL&SB disease. Among these strains, two Pseudomonas isolates, AS19 and AS21, exhibited pronounced inhibition of fungal mycelium growth in vitro, with respective inhibition rates of 57.04% and 54.15% in cell cultures and 66.56% and 65.60% in cell-free culture filtrates. Additionally, both strains demonstrated effective suppression of sclerotium growth. The strains AS19 and AS21 were identified as Pseudomonas sp. by 16S rDNA phylogeny and deposited under accession numbers NAIMCC-B-02303 and NAIMCC-B-02304, respectively. Further investigations revealed the mechanisms of action of AS19 and AS21, demonstrating their ability to induce systemic resistance (ISR) and exhibit broad-spectrum antifungal activity against Alternaria triticina, Bipolaris sorokiniana, Rhizoctonia maydis, and Fusarium oxysporum f. sp. lentis. Pot trials demonstrated significant reductions in BL&SB disease incidence (DI) following foliar applications of AS19 and AS21, with reductions ranging from 25 to 38.33% compared to control treatments. Scanning electron microscopy revealed substantial degradation of fungal mycelium by the strains, accompanied by the production of hydrolytic enzymes. These findings suggest the potential of Pseudomonas strains AS19 and AS21 as promising BCAs against BL&SB and other fungal pathogens. However, further field trials are warranted to validate their efficacy under natural conditions and elucidate the specific bacterial metabolites responsible for inducing systemic resistance. This study contributes to the advancement of sustainable disease management strategies and emphasizes the potential of Pseudomonas strains AS19 and AS21 in combating BL&SB and other fungal diseases affecting agricultural crops.