A new strain, SD12, was isolated from tannery waste polluted soil and identified as Pseudomonas aeruginosa on the basis of phenotypic traits and by comparison of 16S rRNA sequences. This bacterium exhibited broad-spectrum antagonistic activity against phytopathogenic fungi. The strain produced phosphatases, cellulases, proteases, pectinases, and HCN and also retained its ability to produce hydroxamate-type siderophore. A bioactive metabolite was isolated from P. aeruginosa SD12 and was characterized as 1-hydroxyphenazine ((1-OH-PHZ) by nuclear magnetic resonance (NMR) spectral analysis. The strain was used as a biocontrol agent against root rot and wilt disease of pyrethrum caused by Rhizoctonia solani. The stain is also reported to increase the growth and biomass of Plantago ovata. The purified compound, 1-hydroxyphenazine, also showed broad-spectrum antagonistic activity towards a range of phytopathogenic fungi, which is the first report of its kind.