Plant disease needs to be controlled to keep the quality of product and abundance of food produced by farmers all over the world. Hot pepper production in Ethiopia has been reduced from time to time. This is majorly due to the outbreak of different diseases especially fusarium wilt in the hot pepper growing areas. The objective of this study was to isolate and characterize Plant Growth Promoting Bacteria (PGPB) from the hot pepper rhizosphere and internal tissues with potential biocontrol activity against Fusarium oxysporum. The study was conducted from September 2018 up to June 2019. Thirty healthy and vigorous hot pepper plants with intact roots and soil from rhizospheric region were collected randomly from hot pepper growing areas of Yimali Kebele, Awi Zone. A total of 23 endophytic and rhizospheric bacteria were isolated from the hot pepper’s root and rhizospheric soil. Out of those 10 isolates showed antagonistic activity against F. oxysporum. The combined endophytic and rhizospheric bacteria showed significant effect on the growth of F. oxysporum than single isolates (P =0.05, P = 0.009 respectively). In general, according to analysis of variance there is significant percentage of average inhibition difference between combined effects of endophytic and rhizospheric bacteria (GE+GR) compared to GE+GE and GR+GR (P =0.002). There is no significant percentage of average inhibition difference between combined isolates of endophytic and rhizospheric bacteria against F. oxysporum (P = 0.708). In the present study, antagonistic bacterial isolates were able to produce different hydrolytic enzymes such as chitinase, protease, and cellulase. From the present study, it is concluded that Bacillus and Psuedomonas species have the potential to suppress the growth of F. oxysporum which is the pathogen of wilt in hot peppers.