Magnaporthe oryzae, the causative pathogen of rice blast, has caused extensive losses to rice cultivation worldwide. Strains of the bacterium Bacillus subtilis have been used as biocontrol agents against rice blast. However, little has been reported about the interaction between B. subtilis and the rice plant and its mechanism of action. Here, the colonization process and induced disease resistance by B. subtilis SYX04 and SYX20 in rice plants was examined. Strains of B. subtilis labeled with green fluorescent protein reached population of more than 5 × 106 CFU/g after 20 days on mature rice leaves and were detected after 3 days on newly grown leaves. Results showed that SYX04 and SYX20 not only inhibited spore germination, germ tube length, and appressorial formation but also caused a series of alterations in the structures of hyphae and conidia. The cell walls and membrane structures of the fungus showed ultrastructural abnormalities, which became severely degraded as observed through scanning electron microscopy and transmission electron microscopy. The mixture of both B. subtilis and M. oryzae resulted in enhanced activity of peroxidase, and polyphenol oxidase while there was significantly more superoxide dismutase activity in plants that had been sprayed with B.subtilis alone. The present study suggests that colonized SYX04 and SYX20 strains protected rice plants and exhibited antifungal activity and induced systemic resistance, thus indicating their potential biological control agents.