There is a colossal demand for natural pigments and its applications in recent times. In the study, a novel lactone pigment was isolated from a predominant endophytic fungus residing in Bixa orellana L. (Bixaceae) leaves. The endophyte was identified as Fusarium verticillioides through morphological and molecular investigations. The optimum growth parameters of the endophyte for pigment production were at 33 ºC with pH 6.5 in dark. Through comprehensive spectroscopic studies, the structure of the isolated lactone was resolved and identified as (E)-3, 3-dimethyl-4-(pent-1-en-1-yl)-4-propyldihydrofuran-2(3H)-one. The acute oral toxicity study of the pigment investigated upon female Wistar rats indicated the median lethal dose (LD50) value above 1000 mg/kg body weight affirming safety. Thus, the red pigment from the isolated endophyte may be employed as a sustainable source for natural colorant in industries owing to its non-toxicity. © 2021, King Abdulaziz City for Science and Technology.