With the increase in world population, the demography of humans is estimated to be exceeded and it has become a major challenge to provide an adequate amount of food, feed, and agricultural products majorly in developing countries. The use of chemical fertilizers causes the plant to grow efficiently and rapidly to meet the food demand. The drawbacks of using a higher quantity of chemical or synthetic fertilizers are environmental pollution, persistent changes in the soil ecology, physiochemical composition, decreasing agricultural productivity and cause several health hazards. Climatic factors are responsible for enhancing abiotic stress on crops, resulting in reduced agricultural productivity. There are various types of abiotic and biotic stress factors like soil salinity, drought, wind, improper temperature, heavy metals, waterlogging, and different weeds and phytopathogens like bacteria, viruses, fungi, and nematodes which attack plants, reducing crop productivity and quality. There is a shift toward the use of biofertilizers due to all these facts, which provide nutrition through natural processes like zinc, potassium and phosphorus solubilization, nitrogen fixation, production of hormones, siderophore, various hydrolytic enzymes and protect the plant from different plant pathogens and stress conditions. They provide the nutrition in adequate amount that is sufficient for healthy crop development to fulfill the demand of the increasing population worldwide, eco-friendly and economically convenient. This review will focus on biofertilizers and their mechanisms of action, role in crop productivity and in biotic/abiotic stress tolerance.