The soil of urban green spaces is severely degraded due to human activities during urbanization, and it is crucial to investigate effective measures that can restore the ecological functions of the soil. This study investigated the effects of plant growth promoting bacteria (Bacillus clausii) and Fe-modified biochar on soil fertility increases and mechanisms of carbon sequestration. Additionally, the effects on C-cycling-related enzyme activity and the bacterial community were also explored. Six treatments included no biochar or Bacillus clausii suspension added (CK), only Bacillus clausii suspension (BC), only biochar (B), only Fe-modified biochar (FeB), biochar combined with Bacillus clausii (BBC), and Fe-modified biochar combined with Bacillus clausii (FeBBC). Compared with other treatments, the FeBBC treatment significantly decreased soil pH, alleviated soil alkalization, and increased the alkali-hydro nitrogen content in the soil. Compared to the individual application of FeB and BC, the FeBBC treatment significantly improved aggregates’ stability and positively improved soil fertility and ecological function. Additionally, compared to the individual application of FeB and BC, the soil organic carbon (SOC), particulate organic carbon (POC), and soil inorganic carbon (SIC) contents for the FeBBC-treated soil increased by 28.46~113.52%, 66.99~434.72%, and 7.34~10.04%, respectively. In the FeBBC treatment, FeB can improve soil physicochemical properties and provide bacterial attachment sites, increase the abundance and diversity of bacterial communities, and promote the uniform distribution of carbon-related bacteria in the soil. Compared to a single ecological restoration method, FeBBC treatment can improve soil fertility and carbon sequestration, providing important reference values for urban green space soil ecological restoration.