The effects of an intercropping system combined with organic fertilizer application on the yield quality of medicinal plants and the involved mechanisms have not been well elucidated. To evaluate the effects of different fertilizers (vermicompost and chemical fertilizers) on the dragonhead essential oil (DEO) productivity (dragonhead = Dracocephalum moldavica L.) (D) in sole cropping and intercropping with common bean (Phaseolus vulgaris L.) (CB), a 3-year field experiment was carried out using a factorial based on randomized complete block design. We found that the highest common bean seed yield and dry matter productivity of dragonhead were obtained from sole cropping fertilized with vermicompost. Regarding the major DEO constituents, the highest content of geranyl acetate (42.2%), geranial (23.4%), and geraniol (17.81%) were recorded using the cropping ratio of 2D:1CB following the use of vermicompost.Soil micro-biochemical parameters (basic microbial respiration, substrate-induced respiration, microbial biomass carbon, alkaline and acid phosphatase, and urease) in the intercropping systems were found to be higher than those of the corresponding sole croppings. The highest soil microbial activity was observed in the intercropping ratios of 2D:1CB and 1D:2CB following the use of vermicompost. Furthermore, the highest land equivalent ratios (LER = 1.28) were achieved in the intercropping ratio 2D:1CB after vermicompost application. Thus, this combination of stimulated soil microbial activity and functionality, which in turn accelerated nutrient mobilization and availability, enhanced plant performance. Therefore, we can conclude that intercropping dragonhead with common bean at the ratio of 2D:1CB coupled with vermicompost application can be introduced as an alternative and sustainable strategy to reduce the use of chemical fertilizers.