In addition to being used increasingly as a model system in modern molecular biology studies, the free-living nematode Caenorhabditis elegans (Maupas, 1900) is an important pathogen in fungi and straw mushrooms. In this study, Bacillus thuringiensis strain 010 was found to have significantly detrimental activity against C. elegans. To further characterize this activity, the toxicological mechanism was elucidated at molecular level. Genes encoding for crystal protein and chitinase were isolated, cloned, and sequenced. However, the toxicity was detected only in the chitinase. Under transmission electron microscopy, change in the body wall and gut structures of C. elegans was observed, and thus degeneration of body wall and gut in the worms was also investigated. Further bioassay also confirmed the mortality of C. elegans fed with Escherichia coli TB1 strain. These observations suggest great potential for B. thuringiensis 010 as a biocontrol agent against C. elegans and other nematodes.