Cordyceps militaris is well known as a traditional medicinal mushroom and is a potentially interesting candidate for use in cancer treatment. In this study, the potential of the water extract of C. militaris (WECM) to induce apoptosis in human lung carcinoma A549 cells and its effects on telomerase activity were investigated. The growth inhibition and apoptosis induction by WECM treatment in A549 cells was associated with the induction of Fas, catalytic activation of caspase-8, and Bid cleavage. Activation of caspases, downregulation of anti-apoptotic Bcl-2 expression, and upregulation of pro-apoptotic Bax protein were also observed in WECM-treated cells. However, the cytotoxic effects and apoptotic characteristics induced by WECM were significantly inhibited by z-DEVD-fmk, a caspase-3 inhibitor, which demonstrates the important role that caspase-3 plays in the process. In addition, WECM exerted a dose-dependent inhibition of telomerase activity via downregulation of human telomerase reverse transcriptase (hTERT), c-myc and Sp1 expression. Taken together, the data from this study indicate that WECM induces the apoptosis of A549 cells through a signaling cascade of death receptor-mediated extrinsic and mitochondria-mediated intrinsic caspase pathways. It was also conclude that apoptotic events due to WECM were mediated with diminished telomerase activity through the inhibition of hTERT transcriptional activity.