Fungal endophytes are a known warehouse of bioactive compounds with multifarious applications. In the present investigation two compounds, β-Sitosterol (1) and ursolic acid (2), were isolated from Alternaria alternata, an endophytic fungus associated with Morus alba Linn for the first time. The structure of the compounds was elucidated on the basis of comprehensive spectral analysis (UV, IR, 1 H-, 13 C- and 2D-NMR, as well as HRESI-MS). In the in vitro alpha amylase inhibitory assay both compounds (1) and (2) show potent antidiabetic activity. In support, Docking studies indicate significant binding affinity of the isolated compounds. Hence from the present study, it can be concluded that endophytic fungi in Morus alba Linn can find use in antidiabetic drug development in the medicinal industry.Communicated by Ramaswamy H. Sarma.