Screening of plant growth promoting rhizobacteria (PGPR) was carried out by isolating 56 bacterial isolates from rhizosphere and roots of capsicum. The isolates were grouped on morphological similarities (RS1 to RS10), characterized biochemically and evaluated for various plant growth promoting (PGP) traits. Among all, six best isolates (RS2, RS3, RS4, RS7, RS8 and RS10) were evaluated for their effect on seed germination and seedling growth of capsicum under controlled conditions. Out of six, four best performers (RS2, RS3, RS4 and RS7) were evaluated for their effect on growth and yield of capsicum under net house conditions. Among which RS2 isolate possessed maximum P-solubilization (80.0%) and auxin production (29.67 μg/ml). However, RS7 isolate possessed maximum siderophore production (83.3%) and antagonism against Pythium spp. (41.7%), Phytophthora spp. (42.5%) and Colletotrichum spp. (40.1%). Seed bacterization with RS7 isolate (Bacillus sp.) showed maximum increase in shoot length (48.0%), shoot biomass (43.7%), root length (50.0%), root biomass (42.1%), yields (33.7%) and nutrient uptake N (40.0%), P (36.8%) and K (23.6%) over control which was statistically at par with treatment receiving RS2 isolate (Bacillus subtilis). Hence, the two bacterial isolates (RS2 and RS7) were strong to be used as biofertilizer and biocontrol agent for capsicum under mid-hill conditions of northwestern Himalayan region.