Cordyceps militaris, the Chinese medicinal fungal genus Cordyceps, is reported to possess many pharmacological activities including immunological stimulating, anti-cancer, anti-virus and anti-infection activities. However, the molecular mechanisms of C. militaris on biochemical actions in cancer have not been clearly elucidated yet. In the present study, we investigated the anti-proliferative activity of the water extract of C. militaris (WECM) in human hepatocellular carcinoma HepG2 cells. It was found that WECM could inhibit the cell growth in a dose-dependent manner, which was associated with morphological changes and apoptotic cell death such as formation of apoptotic bodies and increased populations of apoptotic sub-G1 phase. Apoptotic cell death of HepG2 cells by WECM was connected with a up-regulation of pro-apoptotic Bax expression, tumor suppressor p53 and cyclin-dependent kinase inhibitor p21 (WAF1/CIP1). In addition, WECM treatment induced the proteolytic activation of caspase-3 and a concomitant degradation and/or inhibition of poly (ADP-ribose) polymerase (PARP), ${eta}-catenin$ and phospholipase $(PLC)-{gamma}1$ protein. Furthermore, caspase-3 inhibitor, z-DEVD-fmk, significantly inhibited WECM-induced apoptosis demonstrating the important role of caspase-3 in the observed cytotoxic effect. Taken together, these findings provide important new insights into the possible molecular mechanisms of the anti-cancer activity of C. militaris.