For years, fungi have served as repositories of bioactive secondary metabolites that form the backbone of many existing drugs. With the global rise in infections associated with antimicrobial resistance, in addition to the growing burden of non-communicable disease, such as cancer, diabetes and cardiovascular ailments, the demand for new drugs that can provide an improved therapeutic outcome has become the utmost priority. The exploration of microbes from understudied and specialized niches is one of the promising ways of discovering promising lead molecules for drug discovery. In recent years, a special class of plant-associated fungi, namely, fungal endophytes, have emerged as an important source of bioactive compounds with unique chemistry and interesting biological activities. The present review focuses on endophytic fungi and their classification, rationale for selection and prioritization of host plants for fungal isolation and examples of strategies that have been adopted to induce the activation of cryptic biosynthetic gene clusters to enhance the biosynthetic potential of fungal endophytes.