Aim: The aim of the present study was to evaluate the effects of the removal of indigenous bacteria from rice seeds on seedling growth and development. Here we report the presence of three indigenous endophytic bacteria in rice seeds that play important roles in modulating seedling development (shoot and root lengths, and formation of root hairs and secondary roots) and defence against pathogens. Methods and Results: Seed-associated bacteria were removed using surface sterilization with NaOCl (bleach) followed by antibiotic treatment. When bacteria were absent, growth of seedlings in terms of root hair development and overall seedling size was less than that of seedlings that contained bacteria. Reactive oxygen staining of seedlings showed that endophytic bacteria became intracellular in root parenchyma cells and root hairs. Roots containing endophytic bacteria were seen to stain densely for reactive oxygen, while roots free of bacteria stained lightly for reactive oxygen. Bacteria were isolated and identified as Enterobacter asburiae (VWB1), Pantoea dispersa (VWB2) and Pseudomonas putida (VWB3) by 16S rDNA sequencing. Bacteria were found to produce indole acetic acid (auxins), inhibited the pathogen Fusarium oxysporum and solubilized phosphate. Reinoculation of bacteria onto seedlings derived from surface-disinfected rice and Bermuda grass seeds significantly restored seedling growth and development. Conclusion: Rice seeds harbour indigenous bacterial endophytes that greatly influence seedling growth and development, including root and shoot lengths, root hair formation and disease susceptibility of rice seedlings. Significance and Impact of the Study: This study shows that seeds of rice naturally harbour bacterial endophytes that play key roles in modulation of seedling development.