Due to increased world population, different approaches have been used worldwide to improve the yield potential of crops in order to fulfill their food requirements. Transgenic crops are one of them which have high yield potential with comparative less input cost due to less reliance on pesticides. This technology has gained tremendous attention without exploring their after effects. Bt-toxins may accumulate and persist in soil due to their binding ability on soil components. In order to find out the potential impacts of Bt cotton residues on substrate use efficiency, activity and diversity of soil microbial community and influence on nutrient dynamics, the present studies were planned at different agro-ecological zones of Punjab (Multan, Bahawalpur and Lodhran). In field survey study, soil sampling from Bt and non-Bt cotton rhizosphere revealed more bacterial population, dehydrogenase and phosphatase activities in Bt-rhizosphere comparative to non-Bt. Regarding nutrient dynamics, percent nitrogen, extractable phosphorous, extractable potassium, NO3-N, Fe and Zn except bulk density were also observed high in Bt-cotton rhizosphere. To verify the results of overhead survey study, field experiments were conducted at four different locations (CCRI-Multan, Naseer pur, Kot Lal Shah and CRS-BWP) in Punjab. Field studies reported that Bt cotton had no adverse effect on microbial population and enzymatic activity in soil. Bacterial population observed more in Bt-cotton rhizosphere and maximum population was observed in CIM-602 (Bt-variety) at all locations while phosphatase and dehydrogenase activities were high in Bt-varieties over non-Bt varieties. The gas exchange characteristics as photosynthetic rate, stomatal conductance, transpiration rate and water use efficiency were maximum as well in Bt-cotton varieties contrast to non-Bt. The maximum increase in CEC, nitrogen, extractable phosphorous, extractable potassium, active C, Fe and Zn concentrations were exhibited in Bt-genotypes of CIM-602 and CIM-599 rhizosphere, while slight improvement in percent organic matter was depicted by these varieties. The maximum biomass production, yield and yield contributing traits, fibre strength, length, GOT and lint percentage were also maximum by Bt-varieties of CIM-602 and CIM-599. There was a negative correlation of GOT with fibre fineness (micronaire value), while all varieties (Bt and non-Bt) showed significant results to fulfil the criteria of fibre fineness. Significant improvement in oil contents, free fatty acids, myristic acid, palmitic acid, stearic acid, oleic acid, linoleic acid, iodine, saponification and acid values except oil pH was observed in Bt-cotton. While carbohydrate and crude protein percentages were higher in non-Bt genotypes of CIM-591 and CIM-573. In conclusion, Bt-cotton had no any negative effect on soil ecology and cottonseed oil quality. So, Bt-cotton could be grown to produce more fibre and oil to fulfil and support the country’s economy.