<p>Insects host diverse fungal communities that produce biologically active secondary metabolites. Here, we use culture-dependent and culture-independent methods to characterise fungi associated with the lac insect <i>Kerria lacca</i> – a species well known for its natural red lac pigment. We isolated several fungi from the external surface of the insects. Of these, only <i>Acremonium</i> sp. ‘ALR’ was found to produce a red pigment under laboratory conditions. We therefore investigated this pigment in relation to the insect’s lac pigment. The pigment from <i>Acremonium</i> sp. ALR was identified as oosporein. In vitro bioassays demonstrated that the fungus exhibits broad-spectrum antimicrobial activity, inhibiting the growth of bacteria and fungi, including sooty moulds associated with the lac insect’s honeydew. The fungus belongs to the order Hypocreales, which includes the lac insect’s yeast-like symbiont and many entomopathogenic fungi that produce toxins and chemically reactive pigments. We detected the fungus on the cuticle of <i>K. lacca</i> nymphs and adult females, as well as in the wax deposits near the site of emergence of crawler nymphs. We hypothesise that the fungus may adhere to the nymphs’ cuticles during their emergence and can get passively transmitted during the host’s life stages. However, oosporein was detected in neither the lac insects nor their resin, based on liquid chromatography mass spectrometry analysis. Conversely, lac pigments were not detected in the pigment extracts of <i>Acremonium</i> sp. ALR, demonstrating that the two pigments are chemically distinct and that the <i>Acremonium</i> sp. ALR did not impact the lac insect’s own pigment synthesis.</p>