Cordyceps sinensis, a caterpillar entomopathogenic fungus-host larva complex, is a rare medicinal herb found in the Qinghai-Tibetan Plateau and its surrounding high-altitude areas. The alternation of generations in the life cycle, whatever the fungus or its host insect, requires special growth conditions. However, it is difficult to simulate the growth conditions of C. sinensis, which hinders its artificial cultivation. In this work, the life cycle from the host larva to C. sinensis was observed in an indoor-cultivation laboratory at 4,200 m a.s.l. on Sejila Mountain, Tibet. Comparative examinations between indoor-cultivated and wild C. sinensis demonstrated that the indoor-cultivated C. sinensis preferred to germinate multiple long, slim stromata at diverse positions on dead larvae, including but not limited to their heads. Their fatty acid composition shows a significant difference in the levels of polyunsaturated fatty acids (PUFAs). In indoor-cultivated C. sinensis, PUFAs constituted 24.59% and 49.43%, respectively, of neutral and polar lipids; meanwhile, in wild C. sinensis, PUFAs represented 34.34% and 61.25% of neutral and polar lipids, respectively. These observations and fatty acid data suggest that environmental factors, particularly temperature, soil pressure and light intensity, strongly affect the growth of C. sinensis. Our new findings may provide important information for improving techniques for the large-scale artificial cultivation of C. sinensis.