Restoring phosphorus (P) cycling and microbial functionality is essential for rehabilitating severely degraded soils. This study investigated how phosphate-solubilizing bacteria (PSB) with biochars derived from rice straw (RB) and grape fermentation residue (GB) reshapes soil P dynamics and microbial processes in soil degraded by overgrazing. Two Klebsiella aerogenes were applied with or without biochar to evaluate effects on soil P fractions, microbial biomass P, enzyme activities, respiration, and maize growth. Our study introduces an innovative approach by using biochar as a protective surface layer to interact with PSB on seeds. RB combined with PSB enhanced labile organic P, microbial respiration, and activities of beta-glucosidase and alkaline phosphatase, indicating intensified mineralization and microbial functional turnover. Both biochars stimulated plant biomass, with RB plus PSB increasing maize dry weight by 1.8-fold over controls. These findings demonstrate that biochar applied as a protective seed layer enhances PSB functions by supplying nutrients, stabilizing microbial microhabitats that increase enzymatic efficiency and accelerate organic P mineralization. This functional coupling between biochar-mediated microenvironmental buffering and strain-specific microbial metabolism reactivates P cycling and supports plant establishment in degraded soils. Our study provides compelling evidence that combining PSB and biochar can restore soil health, improve phosphorus availability, and promote plant development, underscoring their potential as sustainable tools for regenerating degraded dryland ecosystems.