Rhizoctonia solani is a widespread and devastating plant pathogenic fungus that infects many important crops. This pathogen causes tobacco target spot, a disease that is widespread in many tobacco-growing countries and is destructive to tobacco. To identify antagonistic microorganisms with biocontrol potential against this disease, we isolated Streptomyces strains from forest inter-root soil and screened a promising biocontrol strain, ZZ-21. Based on in vitro antagonism assays, ZZ-21 showed a significant inhibitory effect on R. solani and various other phytopathogens. ZZ-21 was identified as Streptomyces olivoreticuli by its phenotypic, genetic, physiological and biochemical properties. Complete genome sequencing revealed that ZZ-21 harbored numerous antimicrobial biosynthesis gene clusters. ZZ-21 significantly reduced the lesion length in detached inoculated leaf assays and reduced the disease index under greenhouse and field conditions. Based on an in vitro antagonistic assay of ZZ-21 culture, the strain exhibited an antifungal activity against R. solani in a dose-dependent manner. The culture filtrate could impair membrane integrity, possibly through membrane lipid peroxidation. ZZ-21 could secrete multiple extracellular enzymes and siderophores. According to a series of antifungal assays, the extracellular metabolites of ZZ-21 contained antimicrobial bioactive compounds composed of proteins/peptides extracted using ammonium sulfate precipitation, which were stable under stress caused by high temperature and protease K. The EC50 value for ammonium sulfate precipitation was determined to be 21.11 μg/mL in this study. Moreover, the proteins/peptides also exhibited biocontrol ability and were observed to alter the plasma membrane integrity of R. solani which were evaluated by biocontrol efficacy assays on detached tobacco leaves and PI staining. Overall, strain ZZ-21 shows the potential to be developed into a biopesticide against tobacco target spot disease.