Fermentation processes using sanguinarine-producing fungi other than Macleaya cordata may be an alternative way to produce sanguinarine (SA), which is a quaternary benzo[c]phenanthridine alkaloid possessing antibacterial, anthelmintic, and anti-inflammatory properties. In this study, a SA-producing endophytic fungus strain BLH51 was isolated from the leaves of M. cordata grown in the Dabie Mountain, China. Strain BLH51 produced SA when grown in potato dextrose liquid medium. The amount of SA produced by this endophytic fungus was quantified to be 178 mu g/L by HPLC, substantially lower than that produced by the host tissue. The fungal SA-which was analyzed by thin layer chromatography and high-performance liquid chromatography-was shown to be identical to authentic SA. Strain BLH51 was identified as Fusarium proliferatum based on the morphological characteristics and nuclear ribosomal DNA ITS sequence analysis. To the best of our knowledge, this is the first report concerning the isolation and identification of endophytic SA-producing fungi from the host plant, which further proved that endophytic fungi are valuable reservoirs of bioactive compounds.