The role of cyanobacteria from soil biocrusts in restoring degraded land is gaining interest in recent years because of their critical role in enhancing soil fertility and preventing erosion. However, soil restoration through cyanobacterial inoculation remains a challenge for large-scale restoration efforts and new methodologies for effective cyanobacterial application need to be developed. Here, we propose a bioenvironmental approach to inoculate soils with pelletized cyanobacteria from soil biocrusts. Fresh cultures of three soil native cyanobacteria strains from two representative N-fixing genera (Nostoc and Scytonema) and a non-heterocystous filamentous genus (Leptolyngbya) were added into a substrate composed of commercial bentonite powder and sand (1:10 wt ratio) and extruded into pellets. Then, in two multifactorial microcosm experiments under glasshouse conditions, we evaluated (i) the survival and establishment over time of the cyanobacteria encapsulated in pellets, and ii) the viability of pelletized cyanobacteria after drying and storing for 30 d, on soils from three arid regions in Australia. Our results showed that pellets can dissolve completely and spread out in all treatments. Scytonema and the consortium of the three cyanobacteria species showed significant (P < 0.001) deeper CR680 peaks, higher chlorophyll a contents and lower albedo compared to the other inoculation treatments. Storing the pellets for 30 d significantly affected the viability of the cyanobacteria inoculum with reductions of approximately 50% in chlorophyll a content (a proxy for cyanobacteria biomass). Overall, our results showed that some cyanobacteria species can be successfully incorporated into extruded pellets and survive on degraded soils. This technology opens a wide range of opportunities for application in large scale restoration programs although further testing and refining through field trials is recommended.