In green chemistry, filamentous fungi are regarded as a kind of robust microorganism for the biotransformation of natural products. Nonetheless, the screening of microorganisms is crucial for the effective biotransformation of natural products, such as phenazine compounds. The precursor metabolite of most phenazine derivatives in Pseudomonas spp. is phenazine-1-carboxylic acid (PCA), the key constituent of shenqinmycin, widely used to control rice sheath blight in southern China. In this study, a new fungus strain Aspergillus sclerotiorum was isolated, which can efficiently convert PCA into 3-hydroxy-phenazine 1-carboxylic acid (3-OH-PCA). Moreover, an effective whole cells biotransformation system was designed by screening optimal reaction conditions and carbon sources. Hence, Aspergillus sclerotiorum exhibited desirable adaptation by the consumption of different carbon sources and maximum whole-cell biomass (10.6 g/L DCW) was obtained as a biocatalyst from glucose. Optimal conditions for whole-cell biocatalysis of PCA were evaluated, including a PCA concentration of 1120 mg/L, a pH of 7.0, a temperature of 25 °C, a rotation rate of 200 rpm, and dry cell weight of 15 g/L for 60 h; thus, 1060 mg/L of 3-OH-PCA was obtained and the conversion efficiency of PCA was 94%. Hence, the results of the repeated batch mood revealed that the biotransformation efficiency of fungus pellets reduced with each subsequent cycle, but remained stable in all five cycles with the provision of a glucose supplement. These findings present the prospect of using filamentous fungi for the whole-cell biocatalysis of phenazine in enormous amounts and the efficient production of 3-OH-PCA. Moreover, these results laid the foundation for further research to disclose the genetic-based mechanism of the strain responsible for PCA biotransformation.