Monascus-fermented rice has traditionally been used as a natural food colorant and food preservative of meat and fish for centuries. It has recently become a popular dietary supplement because of many of its bioactive constituents being discovered, including a series of active drug compounds, monacolins, indicated as the 3-hydroxy-3-methylglutaryl-coenzyme A reductase inhibitors for reducing serum cholesterol level. The controversy of its safety has been provoked because a mycotoxin, citrinin, is also produced along with the Monascus secondary metabolites by certain strains or under certain cultivation conditions. This review introduces the basic production process and addresses on the compounds with bioactive functions. Current advances in avoiding the harmful ingredient citrinin are also discussed.