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The present investigation was carried out to determine the inter-relationship between some physiological attributes of cotton and encapsulated Rs-198 strain. The pot experiment had seven treatments (with or without encapsulated bacteria under different salt stress conditions, 10 replicates) and was carried out in the greenhouse during April-June 2014. Pot results showed that the inoculated encapsulated Rs-198 significantly increased the plant biomass under 0.5% salt stress. Besides, an approximately 19.47% increase in the soluble protein content of cotton with encapsulated Rs-198 inoculated in salt condition and relatively higher chlorophylls a, b and carotenoid concentrations of 0.626, 0.304, and 0.564 mg/g, respectively, were maintained. The proline content and peroxidase activity in cotton plants inoculated Rs-198 under 0.5% salt stress of were reduced by 42.30% and by 24.98%, respectively. In conclusion, application of encapsulated Rs-198 strain was effective in relieving salt stress under saline conditions. microcapsule bioinoculants are potential alternatives for sustainable agriculture due to their low cost of production.