In order to determine the functional benefits of Cordyceps militaris in the immune system, we examined the immunomodulatory activities of C. militaris using an immunocompromised C57BL/6 mice, mouse spleen cells, RAW 264.7 macrophage cells, and A549 lung carcinoma cells. Mice were injected intraperitioneally with an immunosuppressive drug, cyclophosphamide, and then administered orally with 30, 100 and 300 mg/kg of 50% ethanol extract of C. militaris (CME 30, CME 100 and CME 300) for 14 days. CME increased splenocyte proliferation and natural killer (NK) cell activity compared to 3% hydroxypropyl methylcellulose-treated control mice. CME also increased the production of Th1 cytokines, IL-2 and TNF-${alpha}$ in spleen cells isolated from CME-injected mice and in vitro, which suggested the enhanced cellular immunity in response to CME. CME also increased splenocyte proliferation, NK cell activity, and IL-2 and TNF-${alpha}$ production compared to 1 ${mu}M$ methotrexate-treated spleen cells in vitro. We examined whether C. militaris regulates the production of inflammatory mediators in LPS-stimulated RAW 264.7 cells. CME inhibited LPS-induced NO production and iNOS expression in a dose dependent manner, while COX-2 expression was remained unchanged. In addition, CME also has free radical scavenging activity, indicating its antioxidant activity. These results indicate that C. militaris enhances immune activity by promoting immune cell proliferation and cytokine production.