Pyroligneous acid (PA) is often used in agriculture as a plant growth and yield enhancer. However, the influence of PA application on soil microorganisms is not often studied. Therefore, in this study, we investigated the effect of PA (0.01–5% w/w in soil) on the microbial diversity in two different soils. At the end of eight weeks of incubation, soil microbial community dynamics were determined by Illumina-MiSeq sequencing of 16S rRNA gene amplicons. The microbial composition differed between the lower (0.01% and 0.1%) and the higher (1% and 5%) concentration in both PA spiked soils. The lower concentration of PA resulted in higher microbial diversity and dehydrogenase activity (DHA) compared to the un-spiked control and the soil spiked with high PA concentrations. Interestingly, PA-induced plant growth-promoting bacterial (PGPB) genera include Bradyrhizobium, Azospirillum, Pseudomonas, Mesorhizobium, Rhizobium, Herbaspiriluum, Acetobacter, Beijerinckia, and Nitrosomonas at lower concentrations. Additionally, the PICRUSt functional analysis revealed the predominance of metabolism as the functional module’s primary component in both soils spiked with 0.01% and 0.1% PA. Overall, the results elucidated that PA application in soil at lower concentrations promoted soil DHA and microbial enrichment, particularly the PGPB genera, and thus have great implications for improving soil health.