Seven indigenously isolated fungal strains (Aspergillus niger, Aspergillus flavus, Aspergillus terreus, Penicillium citrinum, Penicillium notatum, Pleurotus ostreatus and Trichoderma viradae) were tested for their potential to produce cholesterol lowering drug lovastatin by using different agro-industrial wastes (Corn cobs, corn stover, banana stalk, wheat straw, wheat bran, bagasse) in submerged as well as solid state fermentation. Aspergillus terreus showed maximum production of 18.74 mg/100 mL by wheat bran in solid state fermentation. The fermentation parameters (pH, temperature, Inoculum size, moisture contents and fermentation time) were also optimized for optimum production of lovastatin. It was found that Aspergillus terreus could produce 27.14 mg/100 mL lovastatin under optimum condition of pH (6), temperature (30°C), Inoculum size (2 mL), moisture contents (60%) and fermentation time (120 hrs) in solid state fermentation. The optimized lovastatin was extracted from fermented broth and orally administered to rats. The hypocholesterolemic effect of fermented lovastatin was evaluated on serum ALT, AST, HDL-C, LDL-C, TG and TC level of rats. It was concluded from the study, fermented lovastatin effectively lower the cholesterol level of rats.