Rice sheath blight is a serious disease caused by Rhizoctonia solani that reduces rice yield. Currently, there is a lack of efficient and environmentally friendly control methods. In this study, we found that Bacillus velezensis (B. velezensis) Y6 could significantly inhibit the growth of mycelium in Rhizoctonia solani, and its control efficiency against rice sheath blight was 58.67% (p < 0.01) in a pot experiment. Lipopeptides play an important role in the control of rice sheath blight by B. velezensis Y6, among which iturin and fengycin are essential, and iturin W, a novel lipopeptide in B. velezensis, plays a major role in lipopeptide antagonism to Rhizoctonia solani. In the field, we also found that inoculation with B. velezensis Y6 can increase rice yield (dry weight) by 11.75%. Furthermore, the transcriptome profiling results of the rice roots revealed that there were a total of 1227 differential genes (DEGs) regulated when treated with Y6, of which 468 genes were up-regulated and 971 genes were down-regulated in rice roots compared with the control. Among them, the DEGs were mainly distributed in biological processes (BP) and were mainly enriched in response to stimulus (GO:0050896), response to stress (GO:0006950), and response to abiotic stimulus (GO:0009628). According to the KEGG pathway analysis, there were 338 DEGs classified into 87 KEGG functional pathway categories. Compared with the control, a large number of enriched genes were distributed in phenylpropanoid biosynthesis (map00940), glutathione metabolism (map00480), glycolysis/gluconeogenesis (map00010), and amino sugar and nucleotide sugar metabolism (map00520). In summary, this investigation provides a new perspective for studying the molecular mechanism of B. velezensis in controlling rice sheath blight.