In the search for bioactive compounds, 11 fungal strains were isolated from Indonesian marine habitats. Ethyl acetate extracts of their culture broth were tested for cytotoxic activity against a urinary bladder carcinoma cell line and for antifungal and antibacterial activities against fish and human pathogenic bacteria as well as against plant and human pathogenic fungi. The crude extract of a sterile algicolous fungus (KT31), isolated from the red seaweed Kappaphycus alvarezii (Doty) Doty ex P.C. Silva exhibited potent cytotoxic activity with an IC₅₀ value of 1.5 µg/mL. Another fungal strain (KT29) displayed fungicidal properties against the plant pathogenic fungus Cladosporium cucumerinum Ell. et Arth. at 50 µg/spot. 2-Carboxy-8-methoxy-naphthalene-1-ol (1) could be isolated as a new natural product.