Abstract: Thirty-six isolates comprising 23 species of fungi belonging to 8 genera isolated from five regions in Mediterranean Sea (Alexandria) were screened for production of indole alkaloids. Twenty-two isolates gave positive reactions (blue spots on TLC) with Van Urk's reagent and were regarded as indole alkaloids producers. Penicillium aurantiogriseum AUMC 9757 was isolated from sea sediment, was selected as the most active producer of indole alkaloids for biological evaluation (antimicrobial and antitumor activities). The crude extract of the strain exhibited high activities against four bacterial strains (Staphylococcus aureus, Bacillus cereus, B. subtillus and Salmonella sp.), four fungal strains (Fusarium solani, Alternaria alternata, Aspergillus flavus and A. ochraceus) and liver carcinoma cell line (HEPG2). The maximum concentration (100 μg/ml) killed 82.76% of the viable cells, while 50 μg/ml killed 80.52% of the viable cells. The cytotoxicity bioassay using brine shrimp eggs revealed that, there was no mortality in the tested samples at different concentrations. The present study identified P. aurantiogriseum from marine sediment as a potential producer of safe bioactive compounds which can be used as antimicrobial and anticancer compounds. Key words: Marine fungi, P. aurantiogriseum, alkaloids, antimicrobial and antitumor.