As a biosynthetic precursor of the antimalarial drug artemisinin, artemisinic acid (AA) is abundant in Artemisia annua L. with a content of 8-10-fold higher than artemisinin, but less effective. In this study, the biotransformation of AA was carried out with an endophytic fungus Penicillium oxalicum B4 to extend its utility. After 10-day-culture of the endophyte with AA at 2 mg/mL, eight biotransformation metabolites were isolated from the culture broth, including five undescribed metabolites, namely 3α,14-dihydroxyartemisinic acid, 14-hydroxy-3-oxo-artemisinic acid, 15-hydroxy-3-oxo-artemisinic acid, 12, 15-artemisindioic acid and 1,2,3,6-tetradehydro-12, 15-artemisindioic acid. The fungal enzymes possess the selective capacity to hydroxylate, carbonylate and ketonize the allyl group of AA. The major biotransformation metabolite was the hydroxylated product 3-α-hydroxyartemisinic acid (33.3%) in the cultures of early stage (day 1-6), whereas most of the other biotransformation products were synthesized in the later stage (day 8-10). Compared with AA, some metabolites (3α,14-dihydroxyartemisinic acid, 15-hydroxy-3-oxo-artemisinic acid and 1,2,3,6-tetradehydro-12, 15-artemisindioic acid) possessed stronger cytotoxic activity to the human colon carcinoma cell line (LS174T) and promyelocytic leukemia cell line (HL-60). The metabolites 12, 15-artemisindioic acid and 3-α-hydroxyartemisinic acid exhibited significant inhibitory activity to the lipopolysaccharide-induced nitrite production of RAW 264.7 cells at 10.00 μM and 2.50 μM, respectively. The results demonstrated the potential of fungal endophytes on biotransforming AA to its bioactive derivatives.