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• The pepper endophyte Bacillus velezensis LY7 has antifungal activity. • Strain LY7 contains a rare cupin domain-containing protein OS with antifungal activity. • Cupin domain-containing protein OS induces the expression of genes in anthracnose. • LY7 increased JA and SA levels to improve the stress resistance of pepper plants. • LY7 treatment to seedlings has potential for pepper biocontrol and growth promotion. Anthracnose of pepper (Capsicum annuum L), caused by Colletotrichum scovillei , is one of the three major diseases of pepper that seriously impact yield and quality. As an alternative to the use of synthetic chemical pesticides, a variety of endophytic bacteria have been reported to be potential biocontrol agents with the ability to improve disease resistance and abiotic stress tolerance in host plants. However, the mechanisms of action by which these different bacterial biocontrol agents inhibit the onset and development of disease, in some cases, remains unclear. In the present study, the potential use of the endophytic bacterial strain Bacillus velezensis LY7, originally isolated from pepper leaves, as a biocontrol agent was evaluated. More specifically, the ability of LY7 to control anthracnose in pepper and promote growth was assessed in pot experiments in a greenhouse and in vitro assays. Results indicated that the use of B. velezensis LY7 enhanced the synthesis of jasmonic acid and other hormones in pepper plants, as well as increased disease resistance and plant growth. A 200 × dilution of LY7 fermentation broth reduced disease incidence up to 90.70 %, while also enhancing plant growth. The mechanism of action of LY7 was also evaluated. Results indicated that LY7 secreted an antibiotic protein possessing a cupin domain OS. RNA-sequence analysis of the transcriptome of C. scovillei at several timepoints after exposure to LY7 (24, 48, and 72 h) revealed the up- and down-regulation of several genes. More specifically, LY7 induced the expression of genes associated with biosynthesis pathways and transcription factors involved in anthracnose pathogenicity. Our results indicate that the LY7 strain of induces hormone synthesis in pepper plants that results in enhanced disease resistance and promotes growth, as well as enhances stress tolerance by enhancing antioxidant and defense-related enzyme activity. These results demonstrate the potential of using LY7 for the biocontrol of anthracnose in pepper plants. [ABSTRACT FROM AUTHOR]