The use of microorganisms as pest control agents has become an effective alternative to control plant pathogens. In the present study, twelve microbial isolates were isolated and purified from rhizosphere soil of a healthy rice plant. One of isolate KM5 showed antagonist activity in vitro against Sclerotium rolfsii Saccardo, Helminthosporium oryzae, Gibberella fujikuroi, Rhizoctonia solani Nees and Fusarium udum. KM5 was characterized by microscopic, Gram stain and biochemical methods belonging to genus Bacillus. The genus Bacillus was further confirmed by isolation of genomic DNA, 16S rRNA amplification using Bacillus specific primers. Sequencing of the PCR amplified product using 775 base pairs and further NJ phylogenetic analysis confirmed that the microorganism is a new strain of bacterium named as Bacillus sp. KM5. Partial sequence of 16S rRNA gene has been deposited to NCBI GenBank data base with Accession No. EU266068 and deposited to MTCC with Accession No. MTCC-5413. The cell free culture filtrate and its alginate formulation of Bacillus sp. KM5 inhibited the growth of all test fungi.