Abstract Background Groundnut, Arachis hypogaea L., crop is an important oil seed crop in India and is prone to attack by numerous fungal and viral diseases, among the soil-borne diseases, stem rot caused by Sclerotium rolfsii Sacc. is economically important. Main body of abstract Incidence (86.6%) of the stem rot disease was recorded in Coimbatore district, Tamil Nadu, India, during the roving survey. For its management, an attempt was made to isolate bacterial endophyte from peanut seeds of different groundnut cultivars by culture-dependent analysis. Totally, 16 bacterial endophytes (endophytes groundnut (EGN) 1 to EGN 16 along with standards TNAU-Pf1 and EPC 5) were obtained and characterized through morphological, biochemical and molecular studies and also phytostimulation activities were performed. Among the isolates, EGN 1 and EGN 4 showed positive results for indole acetic acid (IAA), siderophore, phosphate solubilization and protease tests in vitro. The dual culture analysis showed inhibition rates of 60.1% (dual plate assay), 68.23% (filter paper disc assay) and 100% (triangle method of streaking and culture filtrate assay) for EGN 1 against S. rolfsii. Further, the crude metabolite assay showed 97.7% inhibition in EGN 1, followed by 87.7% in EGN 4. The roll towel study showed a high vigour index of 4286.7 in EGN 1; hence, this isolate was chosen. Further, thin-layer chromatography (TLC) analysis showed various bands at 0.72 R f, whereas GC-MS analysis indicated the prominent peaks of hexadecanoic acid and cis-vaccenic acid that may responsible for antifungal activity. In a molecular approach, the genomic DNA of EGN 1 strain was used to amplify a 1200 bp PCR-fragment and sequenced. Short conclusion The overall outcome of this study showed that Pseudomonas spp. EGN 1 had a great potential as a bio-stimulant and biocontrol agent to manage effectively the stem rot in peanut.