As wild Aquilaria sinensis resources are exhausted and protected, China has established a huge number of plantations of Aquilaria trees and developed artificial induction techniques. However, the current output and quality of artificial induction technology have not yet met the expected results. It has been found that high-oil-containing agarwood may contain particular fungal stains associated with agarwood production. To enhance the quality of agarwood, we recovered and characterized three highly active fungi from high-oil-containing agarwood and inoculated them onto A. sinensis trees using two traditional physical methods. The results showed that fungi extracted from high-oil-containing agarwood can effectively increase the yield and quality of agarwood. During the agarwood formation process, parenchyma cells, xylem rays, and axial parenchyma cells in the xylem gradually undergo apoptosis, thereby promoting the expansion of the color range of agarwood. Nine months after the treatment, the alcohol-soluble extract content in agarwood reached the standard specified in the Chinese Pharmacopoeia (10%), and the proportions of sesquiterpenes and chromones in each treatment were 55.82%, 58.31%, 62.65%, 70.97%, and 13.71%, respectively. These results indicate that fungal induction has a positive impact on the quality of agarwood. In addition, compared to drilling and fungus combined induction, “burning holes and fungi” combined induction demonstrates better results and can further improve the yield and quality of agarwood.