Zataria multiflora Boiss., commonly known as Shirazi thyme, is one of the most valuable medicinal and aromatic plants native to Southwest Asia. Owing to its exceptionally high content of phenolic monoterpenes, particularly thymol and carvacrol, this species exhibits remarkable antimicrobial, antioxidant, antifungal, antiviral, anti-inflammatory, and insecticidal activities. During the past decade, increasing concerns regarding environmental pollution, antimicrobial resistance, and excessive use of synthetic pesticides have stimulated growing interest in natural plant-derived bioactive compounds. Consequently, Z. multiflora essential oil has emerged as a promising eco-friendly alternative for sustainable agriculture and plant disease management. This review comprehensively summarizes the latest advances regarding the botanical characteristics, phytochemical composition, biosynthetic pathways, extraction technologies, biological activities, and agricultural applications of Shirazi thyme. Particular emphasis is placed on its antibacterial mechanisms against phytopathogenic bacteria, including Xanthomonas campestris, Pseudomonas syringae, Erwinia amylovora, and Clavibacter michiganensis. The influence of environmental conditions, geographical origin, harvesting stage, drying methods, and extraction techniques on essential oil composition is critically discussed. Furthermore, this review highlights recent developments in nano-formulations, nanoemulsions, encapsulation technologies, biodegradable coatings, and smart delivery systems that significantly enhance the stability and efficacy of Shirazi thyme essential oil. Current challenges associated with commercialization, standardization, phytotoxicity, formulation stability, and regulatory approval are also evaluated. Finally, future research directions focusing on precision agriculture, integrated disease management, nanotechnology, and sustainable crop protection are proposed. This review provides an updated scientific framework supporting the development of Shirazi thyme as a natural antimicrobial agent for environmentally friendly agriculture.