The agriculture industry is in need of novel biopesticides and development of large-scale production of mycopesticide, either fungal cells themselves or cell-free fungal components. The identification of a fungal strain with pesticide activity, and its improvement, is the primary step in developing infective propagules such as conidia, blastospores, chlamydospores, oospores, and zygospores as well as in preparing hydrolytic enzyme mixtures. This review discusses various parameters for submerged and solid state fermentation to produce fungal structures, particularly of mycoparasitic and entomopathogenic species that are prospective candidates for use as mycopesticides. The understanding of the molecular aspects of fungus-fungus and fungus-insect interactions, the role of hydrolytic enzymes especially chitinases in the killing process, and the possible use of chitin synthesis inhibitors are the prime areas of research aimed at making fungi more effective either singly or in combination as mycopesticides.