Endophytic actinobacteria colonize internal tissues of their host plants and are considered as a rich and reliable source of diverse species and functional microorganisms. In this study, endophytic actinobacterial strain YIM 63111 was isolated from surface-sterilized tissue of the medicinal plant Artemisia annua. We identified strain YIM 63111 as a member of the genus Pseudonocardia. A. annua seedlings grown under both sterile and greenhouse conditions were inoculated with strain YIM 63111. The growth of A. annua seedlings was strongly reduced when YIM 63111 was inoculated at higher concentrations under sterile conditions. However, no growth inhibition was observed when A. annua was grown under greenhouse conditions. Using an enhanced green fluorescent protein (EGFP) expressing YIM 63111 strain, we also observed the endophytic colonization of A. annua seedling using confocal laser-scanning microscopy. The transcription levels of the key genes involved in artemisinin biosynthesis were investigated using real time RT-PCR, revealing that cytochrome P450 monooxygenase (CYP71AV1) and cytochrome P450 oxidoreductase (CPR) expression were up-regulated in A. annua upon inoculation with strain YIM 63111 under certain conditions. The up-regulation of these genes was associated with the increased accumulation of artemisinin. These results suggest that endophytic actinobacteria effectively stimulate certain plant defense responses. Our data also demonstrate the use of Pseudonocardia sp. strain YIM 63111 as a promising means to enhance artemisinin production in plants.