Recently, the entomopathogenic fungus Polycephalomyces nipponicus has been determined to be a prolific producer of bioactive compounds that have both antibacterial and antimarial activities, but the anticancer effects of the mycelial extracts have not been well studied. The present study investigates the effects and mechanisms of action of P. nipponicus extracts that are responsible for cell death in the human breast cancer MCF-7 cell line. The results showed that the 50% ethanol extract had greater anticancer activity than the aqueous extract. The 50% ethanolic extract inhibited cell growth at concentrations of just 109.75 ± 3.54 µg mL-1 for 72 h. The aqueous extract's activity was > 400 µg mL-1 against MCF-7 cells. Similar results were obtained from the colony formation assay. Moreover, the 50% ethanolic extract caused a significant increase in the distribution of cells at the G1 phase in a dose-dependent manner. The aqueous extract induced MCF-7 cells to arrest at the G2/M phase in a dose-dependent manner. These were supported by the reduction in the cyclin-dependent kinase (cdk)2, cdk4, and cdk6 genes' expression levels along with an induction of the cyclin-dependent kinase inhibitor p21 in MCF-7 cells after treatment with the extracts. In conclusion, P. nipponicus may be useful for breast cancer prevention and treatment in the future.