Cordyceps militaris is a high-value medicinal and edible fungus that produces many bioactive compounds, including carotenoid, and thus, improving the carotenoid productivity of C. militaris will increase its commercial value. However, little is known about the genetic regulatory mechanism of carotenoid biosynthesis in C. militaris. To further understanding the regulatory mechanism of carotenoid biosynthesis, we performed a large-scale screen of T-DNA insertional mutant library and identified a defective mutant, denoted T111, whose colonies did not change color from white to yellow upon exposure to light. Mutation analysis confirmed that a single T-DNA insertion occurred in the gene encoding a 695-amino-acid putative fungal-specific transcription factor with a predicted Zn2Cys6 binuclear cluster DNA-binding domain found uniquely in fungi. Targeted deletion of this gene, denoted C. militaris carotenogenesis regulatory factor 1 (Cmcrf1), generated the ΔCmcrf1 mutant that exhibited drastically reduced carotenoid biosynthesis and failed to generate fruiting bodies. In addition, the ΔCmcrf1 mutant showed significantly increased conidiation and increased hypersensitivity to cell-wall-perturbing agents compared with the wild-type strain. However, the Cmcrf1 gene did not have an impact on the mycelia growth of C. militaris. These results show that Cmcrf1 is involved in carotenoid biosynthesis and is required for conidiation and fruiting body formation in C. militaris.