Growth inhibition of the root pathogen Pythium ultimum by the biocontrol agent Pseudomonas fluorescens DR54 inoculated on sugar beet seeds was studied in a soil microcosm. Plant emergence was followed, together with bacterial rhizosphere colonization, antibiotic production and effects on fungal growth. P. fluorescens DR54 inoculation of the P. ultimum-challenged seeds improved plant emergence after 7 days compared to a control without the biocontrol strain. At this time, P. fluorescens DR54 was the dominating colony-forming pseudomonad in rhizosphere soil samples from inoculated seedlings as shown by immuno-staining with a strain specific antibody. Viscosinamide, a cyclic lipopeptide, which has previously been identified as a major antagonistic determinant produced by P. fluorescens DR54 and shown to induce physiological changes in P. ultimum in vitro, could be detected in the rhizosphere samples. The impact of P. fluorescens DR54 on the growth and activity of P. ultimum was studied by direct microscopy after staining with the vital fluorescent dyes Calcofluor white and fluorescein diacetate. P. fluorescens DR54 caused reduction in P. ultimum mycelial density, oospore formation and intracellular activity. Further, Pythium oospore formation was absent in the presence of P. fluorescens DR54. A striking effect on zoospore-forming indigenous fungi was also observed in microcosms with P. fluorescens DR54 and, thus, where viscosinamide could be detected; a large number of encysted zoospores were seen in such microcosms both with and without P. ultimum infections. In vitro studies confirmed that purified viscosinamide induced encystment of Pythium zoospores.