Meloidogyne incognita is one of the most detrimental root-knot nematodes (RKNs) globally. The restricted application of chemical nematicides has resulted in an increasing inclination towards environment-friendly alternatives. In this study, a strain of Pseudomonas aeruginosa XR2-39, which was isolated from compost fermentation of edible fungus residue, exhibited effective biocontrol activity against M. incognita. In vitro experiments employing the fermentation filtrate of strain XR2-39 achieved high nematicidal efficacy of second-stage juveniles (J2s), resulting in corrected mortality rates of 97.12% and 100% after 24 h and 48 h, respectively. The fermentation filtrate also demonstrated a high relative hatching inhibition for egg masses (97.87%) and free eggs (100%). In addition, strain XR2-39 exhibited strong capabilities in indole-3-acetic acid (IAA) production (with a yield of 33.01 mg/L), siderophore production (with a yield of 71.45% unit), and phosphate solubilization (with a dissolved amount of 831.15 mg/L). Pot experiments indicated that the incubation of tomato roots with 20% fermentation broth led to an increase in fresh shoot weight, root weight, shoot length, root length, and stem diameter by 448.57%, 136.36%, 179.29%, 49.39%, and 57.14%, respectively, when compared to the water control. Moreover, the inoculation with 20% fermentation broth significantly decreased tomato root galls, resulting in a gall index of 37.00, which was significantly lower than that of the water-control treatment (77.50). Furthermore, the active compound in the fermentation filtrate remained stable within the pH range of 7.0 to 11.0, maintaining a corrected mortality rate of over 89.0%. It also demonstrated thermostability, as the boiled fermentation filtrate (treated at 120 °C for 2 h) showed a high corrected mortality rate against J2s. Additionally, the active substance displayed strong UV tolerance and storage stability. These characteristics of active compounds make strain XR2-39 a promising biocontrol agent for M.incognita.