Cranberry pomace is a byproduct of the cranberry processing industry that can be targeted for production of value-added phenolic ingredients. Bio-processing of pomace by a solid state process using food grade fungi provides a unique strategy to improve nutraceutical properties and to produce functional phenolic ingredients. The investigation was carried out to understand the changes and mobilizations of simple phenolics and diphenyls and their antioxidant properties in cranberry pomace processed by solid-state growth using food grade fungus Lentinus edodes. The role of -glucosidase in the mobilization of phenolic antioxidants by hydrolysis of the glycosides was also investigated. During the course of solid-state growth there was an increase in the extractable phenolic content. Antioxidant activity measured by both 1,1-diphenyl-2-picrylhydrazyl radical (DPPH) inhibition system and -carotene oxidation model system increased over the course of growth. Both phenolics and antioxidant capacity correlated with the increase in the -glucosidase activity and peaked in a similar manner, showing that the enzyme may play an important role in the release of phenolic aglycones from cranberry pomace and, therefore, increase the antioxidant capacity. In addition, HPLC analysis indicated that the cranberry pomace was enriched with ellagic acid to a level of 350 g/g dw of pomace.