The extraordinary biological diversity of tropical forests harbors a rich chemical diversity with enormous potential as a source of novel bioactive compounds. Of particular interest are new environments for microbial discovery. Sloths--arboreal mammals commonly found in the lowland forests of Panama--carry a wide variety of micro- and macro-organisms on their coarse outer hair. Here we report for the first time the isolation of diverse and bioactive strains of fungi from sloth hair, and their taxonomic placement. Eighty-four isolates of fungi were obtained in culture from the surface of hair that was collected from living three-toed sloths (Bradypus variegatus, Bradypodidae) in Soberanía National Park, Republic of Panama. Phylogenetic analyses revealed a diverse group of Ascomycota belonging to 28 distinct operational taxonomic units (OTUs), several of which are divergent from previously known taxa. Seventy-four isolates were cultivated in liquid broth and crude extracts were tested for bioactivity in vitro. We found a broad range of activities against strains of the parasites that cause malaria (Plasmodium falciparum) and Chagas disease (Trypanosoma cruzi), and against the human breast cancer cell line MCF-7. Fifty fungal extracts were tested for antibacterial activity in a new antibiotic profile screen called BioMAP; of these, 20 were active against at least one bacterial strain, and one had an unusual pattern of bioactivity against Gram-negative bacteria that suggests a potentially new mode of action. Together our results reveal the importance of exploring novel environments for bioactive fungi, and demonstrate for the first time the taxonomic composition and bioactivity of fungi from sloth hair.