Grapevine trunk diseases (GTDs) impact the sustainability of vineyards worldwide and management options are currently limited. Biological control agents (BCAs) may offer a viable alternative for disease control. With an aim to develop an effective biocontrol strategy against the GTD pathogen Neofusicoccum luteum, this study investigated the following: (1) the efficacy of the strains in suppressing the BD pathogen N. luteum in detached canes and potted vines; (2) the ability of a strain of Pseudomonas poae (BCA17) to colonize and persist within grapevine tissues; and (3) the mode of action of BCA17 to antagonize N. luteum. Co-inoculations of the antagonistic bacterial strains with N. luteum revealed that one strain of P. poae (BCA17) suppressed infection by 100% and 80% in detached canes and potted vines, respectively. Stem inoculations of a laboratory-generated rifampicin-resistant strain of BCA17 in potted vines (cv. Shiraz) indicated the bacterial strain could colonize and persist in the grapevine tissues, potentially providing some protection against GTDs for up to 6 months. The bioactive diffusible compounds secreted by BCA17 significantly reduced the spore germination and fungal biomass of N. luteum and the other representative GTD pathogens. Complementary analysis via MALDI-TOF revealed the presence of an unknown cyclic lipopeptide in the bioactive diffusible compounds, which was absent in a non-antagonistic strain of P. poae (JMN13), suggesting this novel lipopeptide may be responsible for the biocontrol activity of the BCA17. Our study provided evidence that P. poae BCA17 is a potential BCA to combat N. luteum, with a potential novel mode of action.