Abstract Plants have evolved diverse cellular mechanisms to maintain their fitness under stressful environments. Banana (Musa spp.) plants inoculated with a new rhizobacterial isolate, Pseudomonas aeruginosa strain Y1 (PaY1), showed improved vegetative growth, and increased levels of H2O2, glucosinolates, phenolic compounds, and lignin contents. Plants treated with PaY1 had reduced membrane peroxidation and electrolyte leakages, and exhibited higher PSII efficiencies after drought and submergence treatments. Furthermore, PaY1 treatment reduced disease infection rates in the Foc TR4 (Fusarium wilt pathogen)-inoculated plants. RNA seq results identified signaling molecules activated by PaY1, including ROS/antioxidant molecules and signaling of G protein and sphingolipids. Besides, PaY1 exerted positive effects on hormonal signaling, including auxin, ABA, and jasmonic acid (JA) in banana seedlings. Genes associated with cellular pathways of cell division and flowering control were significantly affected; up-regulated genes were also implicated in cellular pathways regulating nutrient availability. The up-regulated genes functioning in abiotic stress tolerance comprised genes encoding DETOXIFICATION-like proteins, aquaporins, autophagy-like, and MAPKK2-like. Furthermore, genes encoding proteins participating in the regulatory network of disease resistance were discovered, which included members of pathogenesis-related proteins (PRs), cell death associated proteins, proteins implicated in the MAMP-trigger immunity (MTI), and genes such as RGA2-like and ETHYLENE-RESPONSIVE TRANSCRIPTION FACTOR 1B (ERF1B) with predicted functions regulating disease resistance against Fusarium oxysporum in different plant species. The transcriptome data presented here indicated that PaY1 is a potent activator of banana genes related to hormonal signaling and cellular pathways including antioxidant defense, detoxification, and MTI, which worked collaboratively to control plant growth, abiotic and biotic stress tolerance in banana plants.