This study was conducted to evaluate the potential of a microbial fermentation procedure to improve the functional qualities of seaweeds. Aspergillus oryzae, which has been used in traditional Korean fermented foods, was inoculated and cultivated in an aqueous extract of sea tangle (Laminaria japonica). Fermentation of the sea tangle extract by A. oryzae for 4 days resulted in a 3-fold increase in $gamma$-aminobutyric acid (GABA) content. GABA is known to be a bioactive compound. Fungal fermentation of the extract also enhanced its antioxidant activity and increased its total content of phenolic compounds. It was assumed that these changes stemmed from the biodegradation of active compounds of the sea tangle packaged within its rigid structural matrix or occurred as result of fungal fermentation. These results suggested that the application of microbial fermentation to the processing of seaweeds will help in the development of processed foods to meet consumer demands.