Traditional rice seed coating agents (TRSCA) contain toxic components that pollute the environment and threaten human health. The use of safe, high-efficiency, and environmentally friendly seed coating agents is vital for environmental protection. We studied the production of a new, environmentally friendly rice seed coating agent and its mechanism at the seedling stage. We assess the difference in mechanism of action between the new seed coating agent and the representative TRSCAs on the market through laboratory and field experiments. Following the application of the new seed coating agent, bakanae disease was controlled at a rate of over 80.5% and insect pest feeding was controlled at a rate of 81%. More importantly, the LC50 value was 10 times higher than following TRSCA treatment. The coating agent can enhance the activity of plant protective enzymes (peroxidase [POD], catalase [CAT], and superoxide dismutase [SOD]) and the activity of rice seedling roots. The coating agent is antibacterial, disease preventative, deworming, safe, and environmentally protective, and results in the production of strong seedlings, suggesting it would be a good alternative to TRSCA. Our analysis found that the control effect of the seed coating on rice seedling disease was likely achieved by activating the plant protection enzymes (e.g., POD, CAT, and SOD). The effect of the coating agent on rice is likely achieved through increased root activity and the improvement of the rhizosphere micro-ecological system.