Currently, common root rot of wheat has caused significant yield losses worldwide. Biological control is an important method to control common root rot of wheat. An endophytic bacterium, strain NEAU-242-2 was isolated from wheat seeds, which showed the strongest inhibitory activity against Bipolaris sorokiniana (84.2%) and also had strong broad-spectrum antifungal activity, with the inhibition rates over 61.2% against all phytopathogens used in this study except for Rhizoctonia solani (44.5%), and was identified as Bacillus velezensis by 16S rRNA gene sequence and whole genome sequence and average nucleotide identity (ANI) and digital DNA-DNA hybridization (dDDH) values. Pot experiments showed that strain NEAU-242-2 exhibited significant biocontrol effect (80.61 ± 1.22%) on common root rot of wheat in greenhouse. Furthermore, the sterile culture filtrate of strain NEAU-242-2 had strong inhibitory activity (86.96 ± 3.02%) against B. sorokiniana and the main antifungal substance was preliminarily identified as lipopeptides. The crude lipopeptide extracted from strain NEAU-242-2 showed strong antifungal activity (61.45 ± 3.45%) against B. sorokiniana with the IC50 of 25.93 µg/mL, and could cause mycelial wrinkle, fracture, and dehydrated malformation, destroy the structure of cell, and lead to cellular malformation and the disappearance of most membrane-like structures. Besides that, strain NEAU-242-2 could also conspicuously promote wheat seed germination and seedling growth. The fungistasis and plant growth-promoting activity of strain NEAU-242-2 were found to be associated with the production of IAA (19.4 ± 0.6 µg/mL), siderophores, nitrogenases, cell wall-degrading enzymes (proteases and cellulases), and other active secondary metabolites. Additionally, a large number of genes related to antifungal and plant growth-promoting traits were also identified in the whole genome of strain NEAU-242-2. These results indicated that strain NEAU-242-2 had the potential as a biocontrol agent for B. sorokiniana.