Ganoderma lucidum has been traditionally used as a medicine for treatment of bronchitis, arthritis, and high blood pressure, and it has been reported to display many biological activities including anticancer and immune activities. Since mushroom mycelium is known to have excellent biological activities together with mushroom fruiting body, studies on biological activities of mushroom mycelium have been actively conducted. Thus, the present study compared the biological activities before and after the cultivation of Ganoderma lucidum mycelium on Atractylodes rhizoma. When the radical scavenging activity was assessed by the DPPH assay, ARGL (ethanol extract of Atractylodes rhizoma mycelium fermented with Ganoderma lucidum) showed radical scavenging activity of 5.58~82.56% at concentrations of 10~500 μg/assay, while AR (ethanol extract of Atractylodes rhizoma) showed radical scavenging activity of 5.27~72.08% at the same concentrations. When measured by using the ABTS assay, ARGL showed higher radical scavenging activity than AR, which was consistent with the result obtained by the DPPH assay. In the MTT assay, the cytotoxicity of ARGL against all cell lines was higher than that of AR. In particular, the cytotoxicities of AR and ARGL against Hep3B at a concentration of 400 μg/assay were 71.81% and 86.40%, respectively. In addition, the result obtained by the SRB assay was consistent with the result obtained by the MTT assay. According to the results mentioned above, there is a high probability that medicinal herb cultures using mycelium can be used as sources of functional foods since the cytotoxicities against cancer cells and antioxidant activities increased when the mycelium was fermented with Atractylodes rhizoma.