Plant growth promoting rhizobacteria (PGPR) are root-associated bacteria which may benefit the host plant directly by plant growth promotion or indirectly by biological disease control. The disease suppressive consortium PEM is a group of three beneficial bacteria 'Pantoea, Exiguobacterium' and 'Microbacterium' which have been shown to suppress 'Rhizoctonia solani' disease on wheat at a field site in Avon, South Australia. The major aim of this study was to investigate the mechanisms involved in disease suppression. Initial studies tested the ability of PEM strains to promote plant growth in hydroponics and soil systems under controlled conditions. All the bacteria were shown to give significantly increased shoot growth and nitrogen uptake by wheat plants. The involvement of different PGPR traits such as phytohormone production and nitrogen fixation was investigated using biochemical assays and PCR based methods. 'Pantoea' produced indole-3-acetic acid (IAA) in the presence of the precursor tryptophan. 'Pantoea' and 'Microbacterium' strains showed evidence of nitrogen fixation ability and presence of ACC deaminase, which inhibits ethylene production. These results were consistent with observations of altered root morphology. The spatial distribution of PEM strains on the plant roots was studied using scanning electron microscopy, and tagging of 'Pantoea' strains with molecular markers such as 'lacZ' and GFP. The GFP tagged 'Pantoea' strains were detected on the junctions of cell walls and all over the surface of the plant by epifluorescent and confocal laser scanning microscopy (CLSM). The quantitative distribution of PEM population was determined using real-time PCR. This indicated that populations of 'Microbacteria' were significantly increased on the lesion part of the roots, compared with healthy roots or parts of 'Rhizoctonia'-infected roots away from the lesions. Similar results were also observed in conventional plating of the plant root extract. It is concluded that PEM possessed growth promoting characteristics by using a range of mechanisms like other PGPR. PEM can be considered as suitable potential biocontrol agents for 'R. solani' disease on wheat plants. The information generated from this study would be helpful for better understanding of disease management by PEM strains.