<p>Anthropogenic activities and climate change are responsible for land degradation and accelerated rates of desertification. To restore the degraded lands and to prevent desertification, artificial development of biological soil crusts employing cyanobacteria is fast emerging as an environmental option. Several cyanobacteria are able to survive under extreme conditions and they&#xa0;are also integral components of biological soil crust communities. Therefore, in the present study we isolated the cyanobacterium <i>Fischerella</i> sp. from a semi-arid region of Haryana, India, which exhibited drought tolerance, optimal rates of photosynthetic activity, nitrogen fixation, ammonia release and exo-polysaccharide production. Further, this cyanobacterium was inoculated on sandy loam soil and the development of biological soil crust was assessed based on selected soil parameters under laboratory conditions. Inoculation of the cyanobacteria on sandy loam soils resulted in the development of biological soil crust. Scanning electron microscope images of the biological soil crust showed the development of thick filaments which entrapped the sand particles. Sandy loam soil inoculated with the cyanobacteria showed increase in soil chlorophyll content and improvement in spectral properties. Although, <i>Fischerella</i> sp. enhanced the available nitrogen and exo-polysaccharide content of sandy loam soil there were no significant changes in soil organic carbon content. The results showed the desiccation tolerance potential of <i>Fischerella</i> sp. and its role in the induction of biological soil crust and improvement in the soil properties.</p>