Background The present study focuses on diversity and biological activities of the endophytic fungal community from Distylium chinense , a rare waterlogging tolerant plant endemic to the Three Gorges Reservoir. This study has been explored the characteristics of endophytic fungi in waterlogged environment including both aquatic and terrestrial fungi, and they may produce new metabolites under complex and extreme conditions, which may possess bioactive property. Therefore, the antioxidant, antimicrobial and anticancer activities of all endophytes isolated from this study have been investigated. Moreover, the active metabolites of the most broad-spectrum bioactive strain have also been studied.Results A total of 154 fungal endophytes were isolated from roots and stems. They were categorized into 30 morphotypes based on cultural characteristics and were affiliated with 27 different taxa. Among these, the most abundant fungal orders included Diaporthales (34.4%) and Botryosphaeriales (30.5%), which were predominantly represented by the species Phomopsis sp. (24.7%) and Neofusicoccum parvum (23.4%). Fermentation extracts were evaluated, screening for antioxidant, antimicrobial and anticancer activities. Among the 154 isolates tested, 99 (64.3%) displayed significant antioxidant activity, 153 (99.4%) exhibited inclusive antimicrobial activity against at least one tested microorganism and 27 (17.5%) showed exclusive anticancer activity against one or more cancer cell lines. Specifically, the crude extract of Irpex lacteus DR10-1 exhibited note-worthy bioactivities. Further chemical investigation on DR10-1 strain resulted in the isolation and identification of two known bioactive metabolites, indole-3-carboxylic acid ( 1 ) and indole-3-carboxaldehyde ( 2 ), indicating their potential roles in plant growth promotion and human medicinal value.Conclusions These results indicated that diverse endophytic fungal population inhabits D. chinense . The isolated endophyte DR10-1 ( Irpex lacteus ) has the potential to be a source of novel antioxidant/antimicrobial/anticancer compounds. The findings of the present study not only provide a sustainable resource for the utilization of endophytic fungi in D. chinense but also provides an important basis for further understanding of fungal communities in medicinal plants.