Abstract: Water scarcity and soil salinization are significant limitations for agriculture in arid regions, critically hindering sustainable development. Bacillus subtilis, a widely studied rhizosphere-promoting bacterium, has demonstrated promising effects in enhancing crop resilience and productivity under adverse environmental conditions. This study investigated the mechanisms by which B. subtilis modulates soil microenvironmental factors and boosts cotton yield under water-salt stress conditions. In 2022, a field experiment was conducted in mildly saline cotton fields, employing two irrigation regimes (standard irrigation at 4 875 m³/ha and reduced irrigation at 3 900 m³/ha) and various levels of B. subtilis application (0, 22.5, 45.0, 67.5, and 90.0 kg/ha). The experiment assessed changes in soil microbial communities, soil water and salt dynamics, nutrient availability, soil enzyme activity, and cotton yield in response to these treatments.The results revealed that B. subtilis applications significantly altered the soil bacterial community structure, notably increasing the relative abundance of Bacillus species by 16.85% to 54.40%. Through the secretion of extracellular polymeric substances (EPS), B. subtilis enhanced soil water retention by reducing evaporation and facilitating upward movement of water from deeper to surface layers, thus raising soil moisture by approximately 0.02 cm³/cm³ in the cotton root zone. Additionally, the altered water distribution affected salt movement, reducing salt accumulation in deeper soil layers by 2–3 g/kg and promoting salt migration towards the space between plastic mulches. B. subtilis further stimulated soil enzyme activity and the availability of plant-accessible nutrients, significantly increasing water use efficiency by 10.9% and nutrient productivity by 13.8%, which collectively contributed to yield increases between 0.35% and 26.64%.Structural equation modeling indicated that B. subtilis indirectly enhanced the soil water, salt, and nutrient conditions in saline soils through its positive effects on microbial diversity, water use efficiency, and nutrient utilization (path coefficients: 0.876, 0.638, and 0.686, respectively). These factors collectively contributed to a substantial increase in cotton yield (path coefficient: 0.605). Under the standard irrigation regime, the highest cotton seed yield of 6 237.15 kg/ha was observed with the NB2 treatment (45 kg/ha B. subtilis). In reduced irrigation plots, B. subtilis effectively mitigated yield losses due to water stress, with the MB2 treatment achieving a 4.4% increase in boll number and a 3.8% increase in seed cotton yield compared to non-treated controls. Our findings suggest that a B. subtilis application rate of 45 kg/ha is optimal for improving saline soils in arid northwestern regions under water-salt stress, providing a valuable guideline for microbial soil amendment techniques to enhance sustainable cotton production under challenging environmental conditions.