Licorice (Glycyrrhiza uralensis) contains several compounds that have been reported to alleviate menopausal symptoms via interacting with estrogen receptors (ERs). The compounds exist mainly in the form of glycosides, which exhibit low bioavailability and function. To bioconvert liquiritin and isoliquiritin, the major estrogenic compounds, to the corresponding deglycosylated liquiritigenin and isoliquiritigenin, respectively, licorice was fermented with Monascus, which has been demonstrated to deglycosylate other substances. The contents of liquiritigenin and isoliquiritigenin in Monascus-fermented licorice increased by 10.46-fold (from 38.03 μM to 379.75 μM) and 12.50-fold (from 5.53 μM to 69.14 μM), respectively, compared with their contents in non-fermented licorice. Monascus-fermented licorice exhibited 82.5% of the ERβ binding activity of that observed in the positive control (17 β-estradiol), whereas the non-fermented licorice exhibited 54.1% of the binding activity in an in vivo ER binding assay. The increase in the ERβ binding activity was associated with increases in liquiritigenin and isoliquiritigenin contents. Liquiritigenin acts as a selective ligand for ERβ, which alleviates menopausal symptoms with fewer side effects, such as heart disease and hypertension, compared with a ligand for ERα. In addition, Monascus-fermented licorice contained 731 mg/kg of monacolin K, one of the metabolites produced by Monascus that reduces serum cholesterol. Therefore, Monascus-fermented licorice is a promising material for the prevention and treatment of menopausal syndrome with fewer side effects.