Hericium erinaceus (Bull.:Fr) Pers. is a medicinal mushroom that has various health benefits and is a rich source of bioactive compounds and antioxidant activity. In recent years, H. erinaceus has been considered for its many medicinal properties and is widely consumed in Asian countries. This work aimed to explore the potential improvement of coconut water utilization in order to promote growth and increase the yield, as well as the enhancement of bioactive compounds and antioxidant activity of H. erinaceus. The application of coconut water at a concentration of 20% (v/v) resulted in the optimal development and production of H. erinaceus. In terms of biological efficiency, it was demonstrated that the 22.09% increase over the control treatment resulted in a higher yield. Moreover, H. erinaceus cultivated from coconut water intake at all concentrations resulted in higher protein content. Additionally, bioactive compounds such as total triterpenoid content and total phenolic content of H. erinaceus were 67.87–89.24 mg Urs/g DW and 16.62–17.39 mg GAE/g DW, respectively, while H. erinaceus grown on a control treatment had the lowest at 56.84 mg Urs/g DW and 14.42 mg GAE/g DW, respectively. Applying coconut water at all concentrations resulted in H. erinaceus IC50 values of 0.58–0.69 mg/mL exhibiting higher DPPH activities than those grown on control treatment IC50 value of 0.77 mg/mL. Therefore, this finding of the study indicated that the utilization of coconut water as a therapy resulted in a significant enhancement in the development, production, and bioactive compounds of H. erinaceus, in comparison to the control treatment.