Lavandula pubescens Decne (LP) is one of the three Lavandula species growing wildly in the Dead Sea Valley, Palestine. The products derived from the plant, including the essential oil (EO), have been used in Traditional Arabic Palestinian Herbal Medicine (TAPHM) for centuries as therapeutic agents. The EO is traditionally believed to have sedative, anti-inflammatory, antiseptic, antidepressive, antiamnesia, and antiobesity properties. This study was therefore aimed to assess the in vitro bioactivities associated with the LP EO. The EO was separated by hydrodistillation from the aerial parts of LP plants and analyzed for its antioxidant, antimicrobial, anticholinesterase, and antilipase activities. GC-MS was used for phytochemical analysis. The chemical analysis of the EO composition revealed 25 constituents, of which carvacrol (65.27%) was the most abundant. EO exhibited strong antioxidant (IC50 0.16–0.18 μL/mL), antiacetylcholinesterase (IC50 0.9 μL/mL), antibutyrylcholinesterase (IC50 6.82 μL/mL), and antilipase (IC50 1.08 μL/mL) effects. The EO also demonstrated high antibacterial activity with the highest susceptibility observed for Staphylococcus aureus with 95.7% inhibition. The EO was shown to exhibit strong inhibitory activity against Candida albicans (MIC 0.47 μL/mL). The EO was also shown to possess strong antidermatophyte activity against Microsporum canis, Trichophyton rubrum, Trichophyton mentagrophytes, and Epidermophyton floccosum (EC50 0.05–0.06 μL/mL). The high antioxidant, enzyme inhibitory, and antimicrobial potentials of the EO can, therefore, be correlated with its high content of monoterpenes, especially carvacrol, as shown by its comparable bioactivities indicators results. This study provided new insights into the composition and bioactivities of LP EO. Our finding revealed evidence that LP EO makes a valuable natural source of bioactive molecules showing substantial potential as antioxidant, neuroprotective, antihyperlipidemic, and antimicrobial agents. This study demonstrates, for the first time, that LP EO might be useful for further investigation aiming at integrative CAM and clinical applications in the management of dermatophytosis, Alzheimer’s disease, and obesity.