The entomogenous fungus Cordyceps taii, a traditional Chinese medicinal mushroom, exhibits potent important pharmacological effects and it has great potential for health foods and medicine. In this work, the effects of oxygen supply on production of biomass and bioactive helvolic acid were studied in shake-flask fermentation of C. taii mycelia. The value of initial volumetric oxygen transfer coefficient (KLa) within 10.1–33.8 h−1 affected the cell growth, helvolic acid production and expression levels of biosynthetic genes. The highest cell concentration of 17.2 g/L was obtained at 14.3 h−1 of initial KLa. The highest helvolic acid production was 9.6 mg/L at 10.1 h−1 of initial KLa. The expression levels of three genes encoding hydroxymethylglutaryl-CoA synthase, hydroxymethylglutaryl-CoA reductase and squalene synthase were down-regulated on day 2 and day 8 but up-regulated on day 14 at an initial KLa value of 10.1 h−1 vs. 33.8 h−1, which well corresponded to the helvolic acid biosynthesis in those conditions. The information obtained would be helpful for improving the biomass and helvolic acid production in large-scale fermentation of C. taii.