Agricultural innovations in the past decades have addressed the mounting challenges of food, feed, and biofuel security. However, the overreliance on synthetic fertilizers and pesticides in agriculture has exacerbated biodiversity loss, environmental degradation, and soil health deterioration. Leveraging beneficial soil microorganisms, particularly arbuscular mycorrhizal (AM) fungi, offers an emerging solution to reduce dependence on synthetic agrochemicals in crop production. Understanding the mechanisms can help maximize AM fungi’s benefits in response to abiotic stresses. In this review, we explore the main mechanisms of AM fungi in promoting soil nutrient mobilization and uptake, increasing water absorption, stimulating antioxidative enzyme activities, altering morphophysiological structure, and performing hormonal crosstalk when mycorrhizal plants face an abiotic stressor. Also, we highlight the necessity of innovating practical ways to cope with variations in AM fungal species, diversity in host species, soil, and environmental conditions, as well as difficulties in mass multiplication for commercialization. Understanding the mechanisms and limitations may help explore the biofertilizer potential of AM fungal symbiosis, benefiting crop production while addressing the environment and soil health issues.