Mercury resistant (HgR) bacteria were screened from industrial effluents and effluents‐polluted rhizosphere soils near to districts Kasur and Sheikhupura, Pakistan. Out of 60 isolates, three bacterial strains, Bacillus sp. AZ‐1, Bacillus cereus AZ‐2, and Enterobacter cloacae AZ‐3 showed Hg‐resistance as 20 μg ml−1 of HgCl2 and indole‐3‐acetic acid (IAA) production as 8–38 μg ml−1. Biochemical and molecular characterization of selected bacteria was confirmed by 16S ribotyping. Mercury resistant genes merA, merB, and merE of mer operon in Bacillus spp. were checked by PCR amplification. The merE gene involved in the transportation of elemental mercury (Hg0) via cell membrane was first time cloned into pHLV vector and transformed in C43(DE3) Escherichia coli cells. The recombinant plasmid (pHLMerE) was expressed and purified by nickel (Ni+2) affinity chromatography. Chromatographic techniques viz. thin layer chromatography (TLC), high performance liquid chromatography (HPLC), and Gas chromatography–mass spectrometry (GC–MS) confirmed the presence of Indole‐3‐acetic acid (IAA) in supernatant of selected bacteria. The strain E. cloacae AZ‐3 detoxified 88% of mercury (Hg+2) from industrial effluent (p < 0.05) after immobilization in Na‐alginate beads. Finally, Hg‐resistant and IAA producing bacterial consortium of two strains, Bacillus sp. AZ‐1 and E. cloacae AZ‐3, inoculated in mercury amended soil with 20 μg ml−1 HgCl2 resulted 80, 22, 64, 116, 50, 75, 30, and 100% increase as compared to control plants in seed germination, shoot and root length, shoot and root fresh weight, number of pods per plant, number of seeds and weight of seeds, respectively, of chickpea (Cicer arietinum L.) in pot experiments (p < 0.05).