ABSTRACT Kuttanad in India is known as ‘the rice bowl of Kerala’ and renowned for its unique rice cultivation system that is below sea level. However, rice production in this wetland ecosystem is seriously threatened by sheath blight disease caused by the fungus Rhizoctonia solani, which has resulted in a significant decline in grain quality and a 50% loss in yield. In the present study, we isolated two endophytic Bacillus subtilis strains, NIIST B616 and NIIST B627, from the roots of rice plants growing in the Kuttanad region and tested their efficacy in controlling sheath blight disease. We found that rice plants inoculated with a combination of both Bacillus strains and R. solani had a 64.71% lower disease incidence and a 31.02% higher harvest index than plants treated with R. solani alone. An analysis of defence-related enzymes and chemicals revealed that treatment with both isolates together greatly enhanced levels of l-phenylalanine ammonia-lyase (PAL; 2.8 fold), peroxidase (POX; 7.4 fold), polyphenol oxidase (PPO; 4.5 fold), and total phenol (8.5 fold) compared with plants treated solely with R. solani, indicating that these isolates significantly increased plant defence responses through induced systemic resistance (ISR), and this finding was validated through a split-root experiment. More detailed analysis using gas chromatography–tandem mass spectrometry (GC-MS/MS) and liquid chromatography–tandem mass spectrometry (LC-MS/MS) techniques revealed that cyclo-(Pro-Leu) and cyclo-(Pro-Phe) were the major components responsible for the antifungal properties of the two isolates and their capacity to trigger ISR in plants. Thus, the Bacillus strains and their metabolites may be deemed viable alternatives for controlling the prevalence of sheath blight disease in rice plants and augmenting rice production at unique locations such as Kuttanad.