Pythium and Phytophthora species are associated with damping-off diseases in vegetable nurseries and reduce seedling stand and yield. In this study, bacterial isolates were selected on the basis of in vitro antagonism potential to inhibit mycelial growth of damping-off pathogens along with plant growth properties for field assessment in wet and winter seasons. We demonstrate efficacy of bacterial isolates to protect chile and tomato plants under natural vegetable nursery and artificially created pathogen-infested (Pythium and Phytophthora spp.) nursery conditions. After 21 days of sowing, chile and tomato plants were harvested and analysed for peroxidase and phenylalanine ammonia-lyase activities. Pseudomonas sp. strains FQP PB-3, FQA PB-3 and GRP(3 )were most effective in increasing shoot length (P > 0.05%) in both artificial and natural field sites. For example, Pseudomonas sp. FQA PB-3 treatment increased shoot length by 40% in the artificial Pythium 4746 infested nursery site in chile plants in the wet season. The bacterial treatments significantly increased the activity of peroxidase and phenylalanine ammonia-lyase in chile and tomato plant tissues, which are well known as indicators of an active lignification process. Thus, we conclude that treatment with potential bacterial plant growth promoting agents help plants against pathogen invasion by modulating plant peroxidase and phenylalanine ammonia-lyase activities.