The phylum Basidiomycota constitutes the second-largest higher taxonomic group of the Kingdom Fungi after the Ascomycota and comprises ca 35,000 species (Halling et al., 1997). They have been proved to be a considerable resource for novel natural products. However, only a small number (~ 2%) of these fungi have been cultured and studied for their potential of producing useful secondary metabolites. The combination of extensive fieldwork, morphology study, phylogeny analysis, biotechnology process, and analytical chemistry resulted in a high discovery rate of novel metabolites. The research in this thesis focuses on the characterization of bioactive secondary metabolites from basidiomycetes originated from Kenyan Kakamega tropical forest and Mount Elgon national reserve. Twenty-seven strains were cultivated in three standard media. Extractions from both mycelia and supernatant were screened by antimicrobial assays and LCMS analysis (Appendix). Five strains were selected for scale-up fermentation, which led to the identification of forty-three previously undescribed bioactive compounds together with several known compounds. Among these, four compounds were identified with new carbon skeletons. In addition, the extraction and isolation of fruiting bodies from one fungus also resulted in the discovery of five unknown secondary metabolites.Thirteen previously undescribed metabolites, (6R,7S,10R)-7,10-epoxy-7,11-dimethyldodec-1-ene-6,11-diol and twelve sesquiterpenes elgonenes A-L together with the known compound p-coumaric were isolated from Sanghuangporus sp. (MUCL56354). Most of these exhibited weak antimicrobial effects and cytotoxicity (publication 1). A new phelligridin L together with the other six nematicidal and antimicrobial secondary metabolites 3,14-bihispidinyl, hispidin, ionylideneacetic acid, phellidine E, phellidine D, and 1S-(2E)-5-[(1R)-2,2-dimethyl-6-methylidenecyclohexyl]-3-methylpent-2-enoic acid were isolated and characterized from another Sanghuangporus sp. (MUCL55592, publication 4). Tyromycin A and twelve previous undescribed derivatives, skeletocutins A-L, were identified from Skeletocutis sp. (MUCL56074). These showed selective activities against Gram-positive bacteria, while skeletocutin J weakly inhibited the formation of biofilm of Staphylococcus aureus. The antiviral activity against HCV of tyromycin A is also reported in publication 2. Five further tyromycin A derivatives skeletocutins M-Q were isolated from Skeletocutis sp. fruiting bodies (publication 3). Five new pregnenolone type steroids aethiopinolones A–E were isolated from the mycelial culture of Fomitiporia aethiopica (MUCL56047). These compounds exhibited moderate cytotoxic effects against various human cancer cell lines (publication 5). From Heimiomyces sp. (MUCL56078), seven novel compounds were isolated and four of them with new carbon skeletons. The determination of their stereochemistry is ongoing. The compounds isolated from MUCL56078 exhibited activity against Gram-positive bacteria and moderate cytotoxicity. Even though a fraction of basidiomycetes obtained from the fieldwork have been studied extensively in the past three years, a large number of novel chemical molecules with bioactivities could already be identified. This indicating Basidiomycota have the potential to be a promising source for novel secondary metabolites, which may lead to the discovery of new antibiotics and other useful compounds.