Paenibacillus polymyxa(Pp) KB16 was isolated from rice fields, and identified by 16S ribosomal RNA sequencing and phylogeny. The purpose of this study is to investigate the mechanism of induction and improvement of metabolite production of chitosan, a culture nutrient, in the productivity of Pp KB16 bioprocess. In Pp KB16 growth, there was a positive correlation between biosurfactant production and biofilm formation induction within the 0.1% and 0.3% chitosan concentration ranges. In particular, in 0.1% of chitosan, genes directly involved in the production of surfactin lipopeptide or chitosanase were expressed at 6.6-fold or 5.0-fold higher levels. In addition, chitosanase induction and enzyme activity including 31.6 kDa were significantly increased by SDS-PAGE for 7 days of culture. Pp KB16 cultured with chitosan substrate inhibited the mycelia growth of Rhizoctonia solani by more than 67%, and showed more than 62% control effect on damping-off in cucumber seedlings. Overall, the results of this study show that the selection of the chitosan culture substrate synergistically affects the production of secondary metabolites by the Pp KB16 strain and consequently affects the antifungal activity.