Medicinal plants are a wealthy source of natural medicinal properties and remain as base for new drug discoveries. Endophyte from the specific medicinal plants produce the analogous metabolites as that of the host plant. The metabolites from the endophytes comprise maximum therapeutic properties and have been extensively applied in treating various diseases and disorders. This study was focused on identification of the endophytic fungi from the medicinal plant Blumea axillaris and investigates the diversity of endophytic fungi from various explants of the same plant. The explants were cultured on potato dextrose agar and 6 endophytic fungi were successfully isolated from Blumea axillaris. They were identified morphologically and confirmed with molecular analysis as Xylaria arbuscula, Paraphoma radicina, Phomopsis phaseoli, Sordaria fimicola, Aspergillus amstelodami, Diaporthe eucalyptorum. The DNA sequences were analyzed by BLAST and the phylogenetic tree was constructed with neighbor joining method. The six isolates were subjected to antagonistic activity for the selection of potential strain and the bioactive strain Xylaria arbuscula was selected for the production of secondary metabolites by optimization. The parameters like pH, temperature, incubation period, carbon and nitrogen (organic and inorganic source) were optimized for secondary metabolite production. The fungal metabolite was extracted by solvent extraction method using polar and non-polar solvents like propanol, methanol, chloroform, acetone and ethyl acetate. To investigate the bioactivities of the fungal crude extract was subjected first for its antioxidant activity using DPPH radical scavenging method, followed by antimicrobial activity of methanolic (MeOH) extract of Xylaria arbuscula, that were also analyzed by the agar well-diffusion method against the clinical pathogens Staphylococcus aureus, Staphylococcus epidermidis, Enterococcus faecalis, Escherichia coli, Pseudomonas aeruginosa, Klebsiella pnuemoniae, Proteus mirabilis, Aspergillus niger and Candida albicans.