ABSTRACT Understanding how plant‐associated yeasts mediate plant fitness under environmental stress remains mostly elusive. Here, the role of auxin and salicylic acid (SA)‐producing psychrophilic yeast endophyte Naganishia liquefaciens strain ARY7, isolated from the roots of cold‐desert plant Arnebia euchroma , was investigated for low temperature (LT; 10°C) tolerance in Arabidopsis thaliana . ARY7‐inoculated plants had higher biomass, exhibited higher photosynthetic efficiency, starch accumulation, and reduced stress‐responsive parameters at 10°C than their non‐inoculated controls. ARY7‐inoculation in the Arabidopsis enhanced auxin signaling in the roots, leading to more lateral roots and root hair development at 10°C. Increased exopolysaccharide (EPS) accumulation around roots and root colonization by ARY7 at 10°C also suggested its role in cold tolerance. The SA‐production ability of ARY7 was supported by the elevated SA levels and upregulation of key SA biosynthesis genes ( SID2 and PBS3 ) in ARY7‐inoculated plants at 10°C. In addition, an improved seedling phenotype in ARY7‐inoculated sid2 (SA‐deficient) mutants of Arabidopsis further confirmed the role of ARY7‐produced SA‐mediated plant fitness. The downregulated expression of key cold‐responsive genes ( CBF , COR , RD29A , and P5CS1 ) in the leaves of ARY7‐inoculated plants indicated reduced sensitivity to LT. This study established that the ARY7‐mediated plant cold tolerance is due to the increased ARY7‐root colonization through EPS production and involves auxin and SA signaling. This study provides valuable insights to explore plant‐associated psychrophilic yeasts for protecting plants from various abiotic stresses, including cold temperature.