The phenomenon of allelopathy refers to the chemical interference among plants, where plants excrete secondary bioactive compounds (allelochemicals) that influence the growth and development of their neighbors. These compounds include phenolic acids, terpenoids, flavonoids, alkaloids, and others, which are released into the soil through various pathways such as root exudation, volatilization, leaching, or decomposition. These allelochemicals interfere with the physiological and biochemical processes within the receiver plant, including seedling growth, photosynthesis, respiration, and nutrient dynamics, as well as enzymes, nucleic acids, cell division, and water relations. The longevity of these bioactive allelochemicals in the soil is influenced by various factors, including climate, soil leaching, and the soil microbiome. Microorganisms such as bacteria, fungi, and actinomycetes play a crucial role in modifying allelochemicals by degrading, activating, or transforming them. Microbial degradation of allelochemicals can reduce the tenacity and toxicity, whereas microbial transformation can enhance their phytotoxicity. Symbiotic microorganisms, such as arbuscular mycorrhizal fungi (AMF) and plant growth-promoting rhizobacteria (PGPR), influence allelopathy by modifying root exudates, nutrient uptake, and stress responses. This role of microbes for the allelochemical modification can be harnessed for sustainable agriculture, such as natural weed suppression, pest management, and the reduction of autotoxicity in continuous cropping systems. From an ecological point of view, the microbial interactions with allelochemicals influence plant competition, succession, and invasion dynamics, impacting soil health and ecosystem stability. In conclusion, the interaction between soil microorganisms and allelopathy is dynamic and multifaceted, which shapes plant–plant and plant–soil interactions. The soil microbiome acts as an active regulator, shaping whether allelochemicals are intensified, neutralized, or transformed. This understanding has profound implications for agriculture and ecology, offering opportunities to optimize beneficial aspects of allelopathy for sustainable practices. Future research integrating chemical, microbial, and ecological perspectives will be essential to fully understand and utilize these interactions for ecosystem management and agricultural productivity.