The genus Luteibacter, a member of the family Rhodanobacteraceae, encompasses Gram-negative bacteria found in diverse environments. In the present study, four yellow-pigmented bacterial isolates designated as PPL193T, PPL201, PPL552, and PPL554 were obtained and identified as Gram-negative, rod-shaped, and motile bacteria. Biochemical characterization and examination of the 16S rRNA gene sequence, derived from the genomic sequence, identified it as belonging to the genus Luteibacter. The isolates are closely related to Luteibacter yeojuensis R2A16-10T, forming a distinct monophyletic lineage with L. aegosomatis KCTC 92392T and L. anthropi CCUG25036T. The calculated values for pairwise ortho Average Nucleotide Identity and digital DNA-DNA hybridization in comparison to previously reported Luteibacter species fell below the established thresholds for species delineation. As this novel species was isolated from rice seeds as a potential Xanthomonas due to its distinctive yellow-colored colonies, we sought to identify the presence of xanthomonadin pigment in this species. Intriguingly, our findings revealed the presence of the typical peak corresponding to xanthomonadin in the UV spectra, confirming its presence in this novel species and adaptation to plant habitat. Furthermore, the detailed genomic investigation also uncovered the genomic locus corresponding to xanthomonadin biosynthetic gene cluster, further suggesting that members of this novel species are co-habitants of plant pathogenic and plant probiotic Xanthomonas group of phytobacteria within rice seeds. Apart from protease production, the species was found to produce Indole-3-Acetic Acid (IAA) in higher quantities and was also able to protect plants from Xanthomonas oryzae pv. oryzae, a major pathogen of rice indicating its probiotic nature. Genome scanning revealed the presence of genomic region(s) encoding loci for biosynthesis of anti-microbial peptides and other metabolites with probiotic properties, further confirming its probiotic properties. This study highlights the importance of using a combination of phenotypic and genotypic methods for bacterial identification and expands our knowledge of the diversity and distribution of diverse bacteria associated with rice seeds and their microbiome. Luteibacter sahnii sp. nov. is proposed as a novel species of the genus Luteibacter with PPL193T=MTCC 13290T=ICMP 24807T=CFBP 9144T as its type strain and PPL201, PPL552, and PPL554 as other constituent members.