Aims: Endophytic fungi are microorganisms that live asymptomatically within plant tissues, producing a wide range of metabolites, including compounds potentially useful for drug development. We investigated endophytic fungi from Maliau Basin, Sabah to identify strains producing bioactive compounds, notably with antimicrobial activity. Methodology and results: A total of 23 plants were sampled yielding 345 endophytic fungal isolates. Of these, 44 isolates were screened for antimicrobial activity against nine species of bacteria and fungi, revealing 14 endophytes producing bioactive metabolites. Crude fungal extracts were obtained from broth cultures of endophytic isolates with promising activity while the fungal strains were identified using molecular methods. The crude extract of endophyte MB4 WA10, isolated from Callophyllum sp. (bintangor) showed IC50 of 2.6 mg/mL against S. aureus and 0.6 mg/mL against B. subtilis while the extract of MB22 WA16, an isolate identified as Valsaceae sp., was also active against S. aureus with an IC50 of 1.37 mg/mL. Another isolate, namely MB5 L4 (WA), was identified as a Phomopsis sp. and its extract was the most active against S. aureus with an IC50 of 1 mg/mL. The HPLC fraction of this fungal extract with the highest inhibition (92.37%) of S. aureus was purified for compound isolation and identification. A polyketide compound, 2,3-dihydro-2- hydroxy-2,4-dimethyl-5-trans-propenylfuran-3-one (C9H12O3), with molecular weight of 168.192 was identified based on mass spectral and NMR data analysis. This previously identified compound is known to have other antimicrobial properties. Conclusion, significance and impact of study Rainforests in Malaysia, especially Maliau Basin, harbour many species of fungal endophytes, producing useful bioactive compounds that may be explored for further potential uses, including antimicrobial activity.