Damping-off caused by Pythium aphanidermatum (Pa) is one of the most destructive diseases for watermelon seedlings. Application of biological control agents against Pa has attracted the attention of many researchers for a long time. In this study, the actinomycetous isolate JKTJ-3 with strong and broad-spectrum antifungal activity was screened from 23 bacterial isolates. Based on the morphological, cultural, physiological, and biochemical characteristics as well as the feature of 16S rDNA sequence, isolate JKTJ-3 was identified as Streptomyces murinus. We investigated the biocontrol efficacy of isolate JKTJ-3 and its metabolites. The results revealed that seed and substrate treatments with JKTJ-3 cultures showed a significant inhibitory effect on watermelon damping-off disease. Seed treatment with the JKTJ-3 cultural filtrates (CF) displayed higher control efficacy compared to the fermentation cultures (FC). Treatment of the seeding substrate with the wheat grain cultures (WGC) of JKTJ-3 exhibited better control efficacy than that of the seeding substrate with the JKTJ-3 CF. Moreover, the JKTJ-3 WGC showed the preventive effect on suppression of the disease, and the efficacy increased with increase in the inoculation interval between the WGC and Pa. Production of the antifungal metabolite actinomycin D by isolate JKTJ-3 and cell-wall-degrading enzymes such as β-1,3-glucanase and chitosanase were probably the mechanisms for effective control of watermelon damping-off. It was shown for the first time that S. murinus can produce anti-oomycete substances including chitinase and actinomycin D. This is the first report about S. murinus used as biocontrol agent against watermelon damping-off caused by Pa.