This study is to characterize the postulated anti-inflammatory effect of the hot water extracts from the Phellinus baumii. RAW264.7, macrophage cell line, was activated by lipopolysaccharide (LPS) and, further, treated with Phellinus baumii's aqueous extract. When the cultured macrophage cells were treated with LPS, they show typical signs of endoplasmic reticulum stress (ERS) and an increment in secretion of inflammatory cytokine compared to the non-treated control: The expression of glucose-regulated protein78 (Grp78), Grp94, and C/EBP homologous protein/GADD 153 (CHOP) increased along with augmented secretion of interlukin-6. Cellular nitric oxide content also significantly went up in comparison to the non-LPS treatment. When the LPS-treated RAW264.7 was treated with the aqueous Phellinus baumii extracts, however, the expression of ERS markers markedly reduced and the release of nitric oxide declined. Also, the expression of induced nitric oxide synthase (iNOS) notably diminished similarly as the NO content. In conclusion, this study strongly indicated that aqueous Phellinus baumii extract can be utilized directly as anti-inflammation agent and serves as a source of functional ingredient to lessen the inflammation.