This invention describes the large-scale fermentation and processing of Chinese caterpillar fungus. In this invention, hirsutella sinensis strains are used as the fermentation strain and cultivated in the inclined plate and shaking-bottle. 3-5% of potato, 0.5-2% of soybean powders, 0.01-0.02% of soifnum muicfun, 0.01-0.02% of Chinese yam, 0.5-2% of protein, 0.5-5% of glucose, a small amount of dipotassium hydrogen phosphorus and magnesium sulfate, and water culture medium are successively directed into all levels of fermenter for fermentation and processing. The yield of the fermented product is 20% higher than that in the present processes, the fermentation periodic time is 12 days shorter, the cost is 20% lower and the pollution rate is 2% lower. Through the DNA molecular sequence examination by the institute of microbes, Chinese Academy of Sciences, the constitution of the fermented product is the same with that of natural Chinese caterpillar fungus, and the content of cordycepin, adenosine, Chinese caterpillar fungus polyoses, sterol, biological base, amino acids and trace elements is much higher than that in natural Chinese caterpillar fungus. The pharmacological action of the fermented product is better than that of natural Chinese caterpillar fungus.