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 solid state fermentation (SSF) using food grade fungi provides unique strategies to improve nutraceutical properties and to produce functional phenolic ingredients. Several functional phenolic phytochemicals exist as glycosides or as other conjugated forms with reduced biological activity. We hypothesize that during SSF the fungal glycosidases mobilize some phenolic antioxidants in cranberry pomace and their activity by hydrolysis via β-glucosidase and releasing the aglycone. To develop this strategy we used food grade fungus Rhizopus oligosporus. Our goal was to target the release of simple phenolic aglycones and mobilized diphenyls. SSF of cranberry pomace was done for 16 days with nitrogen sources, ammonium nitrate (NH 4NO 3) and fish protein hydrolysate (FPH). The two nitrogen treatments increased water extractable phenolics by 15–26% by day 10 in the pomace. Antioxidant protection factor was highest on day 10 for both nitrogen treatments and was 20–25% higher than control for water extracts and 16.5–19.5% for ethanol extracts. The DPPH radical inhibition (DRI) capacity increased by 5% only for the NH 4NO 3 treatment and gradually decreased for FPH treatment in water extracts. There was no significant change in DRI of the ethanol extracts. The β-glucosidase activity increased by 60-fold for NH 4NO3 treatment and by over 100-fold for FPH treatment and correlated well with the increase in the extractable phenolics and antioxidant activity. Changes in diphenyl profiles during the solid-state process analyzed using HPLC indicated that ellagic acid increased by 4–5 fold in water extracts for both the nitrogen treatments. This increase was between 15–27% in the ethanol extracts. We conclude that SSF of cranberry pomace increased the antioxidant activity concurrent with increased β-glucosidase activity. The HPLC profile showed ellagic acid, a compound with anti-carcinogenic properties was enriched. The antioxidant function has implications for prevention of major oxidation-linked diseases such as cancer and CVD. This value-added SSF strategy is an innovative approach to enhance nutraceutically-relevant functional phytochemicals for food and feed applications.