Fusarium and verticillium wilt are the primary diseases affecting cotton plants, significantly reducing both the yield and quality of cotton. Paenibacillus spp. are crucial biocontrol strains for controlling plant diseases. In this study, Paenibacillus peoriae MHJL1, which could prevent the pathogenic fungi of fusarium and verticillium wilt and promote cotton growth, was isolated from the rhizosphere soil of cotton plants. Whole-genome analysis of strain MHJL1 identified 16 gene clusters for secondary metabolite synthesis, including fusaricidins with potent antifungal properties. By optimizing the fermentation process, the cell and spore numbers of MHJL1 were increased to 2.14 × 10⁸ CFU/mL and 8.66 × 10⁸ CFU/mL, respectively. Moreover, the antifungal ability of MHJL1 was also increased by 31.48%. In pot experiments conducted with healthy soil, the control rates for MHJL1 against fusarium and verticillium wilt were found to be 44.83% and 58.27%, respectively; in experiments using continuously cropped soil, the control rates were 55.22% against fusarium wilt and 48.46% against verticillium wilt. Our findings provide valuable insights for the biocontrol application and fermentation of P. peoriae MHJL1, while also contributing a new resource for the development of microbial agents.