In the present study, red ginseng extracts were fermented by Paecilomyces tenuipes and the protopanaxdiol-type ginsenosides in the extracts were bio-transformed to F2, Rg3, Rg5, Rk1, Rh2, and CK determined by a high-pressure liquid chromatography analysis. It indicates that P. tenuipes is a microorganism to biotransform protopanaxdiol-type ginsenosides to their less glucosidic metabolites. Other biotransformed metabolites during fermentation were also analyzed using a GC-MS and identified as 2-methyl-benzaldehyde, 4-vinyl-2-methylphenol, palmitic acid, and linoleic acid. Antiulcerogenic activity of the fermented red ginseng extract (FRGE) on gastric mucosal damage induced by 0.15 M HCl in ethanol in rats was evaluated. FRGE was shown to have a potent protective effect on gastritis with 60.5% of inhibition rate at the dose of 40 mg/kg when compared to 54.5% of the inhibition rate at the same dose for stillen, the currently used medicine for treating gastritis. Linoleic acid showed a strong inhibition on gastritis with 79.3% of inhibition rate at the dose of 40.0 mg/kg. FRGE exhibited a distinct anticancer activity including growth inhibition of the two human colon cancer cells HT29 and HCT116. HT29 cells were less susceptible to FRGE in comparison with HCT116 cells. Taken together, fungal fermentation of the red ginseng extract induced hydrolysis of some ginsenosides and FRGE exhibited potent antiulcerogenic and anticancer activities. These results refer to use FRGE as a new source for treating human diseases.