This study was performed to investigate the antioxidant and antidiabetic activities of soybean fermented with Monascus. Also, the changes in the content of isoflavones and Monacolin K were analyzed. It was observed that the glycoside forms of daidzin and genistin were converted to aglycones of daidzein and genistein within 6 days of fermentation. The product can be used as a health functional material that can increase bioavailability. Monacolin K production was found to increase significantly with the progression of fermentation with an increase to 0.04 mg/g and 0.44 mg/g on 6 and 12 days of fermentation, respectively. The DPPH radical scavenging activity of soybean fermented with Monascus was significantly increased compared to that of soybean. The protein expression of inflammation-related genes (TNF-α, IL-6, and COX-2) in the MIN cell was significantly increased in the presence of alloxan compared to the normal group, but a decrease was observed in the presence of soybean fermented with Monascus. In conclusion, soybean fermented with Monascus showed the highest antidiabetic and antioxidant effects. These results suggest that soybean fermented with Monascus has the potential to be used as a beneficial ingredient with antidiabetic and antioxidant effects.