Cordyceps is a traditional Chinese medicinal herb well-known in China, Korea and Japan since B.C. 2,000. The original entomopathogenic fungus, Cordyceps sinensis belonging to the genus Cordyceps could not be found inside Korean peninsula due to the absence of the host insect for the corresponding entomogenous fungus. The development of artificial production methods of Korean type Cordyceps using the silkworm Bombyx mori as in vivo culture medium for the the entomopathogenic fungus Paecilomyces tenuipes is the first, and wonderful occasion in the research history of insect industry of this global world. The aim of this article is to review the historical research background, mass-production methods, and pharmacological effects of the silkworm-dongchunghacho (Paecilomyces tenuipes) which is a newly developed Korean medicinal insect-borne mushroom, and another non-insect-borne medicinal mushroom (Cordyceps militaris and Cordyceps pruinosa). Their biological actions include anti-tumor, immunostimulating, anti-fatigue, anti-stress, anti-oxidant, anti-aging, anti-diabetic, anti-inflammatory, anti-thrombosis, hypolipidaemic and insecticidal effects. The bioactive principles are protein-bound polysaccharides (hexose, hexosamin), cordycepin, D-manitol, acidic polysaccharide etc. Protein-bound polysaccharides and n-butanol fractions were demonstrated to show a significant anti-tumor activities but did not show a cytotoxicities. D-mannitol exhibited a significant prolongation of the life span in tumor bearing mice. Ergosterol did not show an efficient anti-tumor activity, but showed a significant phagocytosis enhancing activity. Anti-tumor activity of silkworm-dongchunghacho might be attributed to immuno-stimulating activities rather than cytotoxic effects [164]. Also this review comprises the breeding of Dongchunghacho varieties, optimization of culture conditions, improvement of learning and memory by Dongchunghacho, application of them as foods and chemical constituents.