It is generally accepted that Monascus pigments are predominantly cell-bound, including both intracellular and surface-bound pigments. This long-term misconception was corrected in the present work. Production of extracellular crystal pigments by submerged culture of Monascus sp. was confirmed by microscopic observation and collection of Monascus pigments from extracellular broth by direct membrane filtration. Following up the new fact, the bioactivity of mycelia as whole-cell biocatalyst for biosynthesis and biodegradation of Monascus pigments had been detailedly examined in both an aqueous solution and a nonionic surfactant micelle aqueous solution. Based on those experimental results, cell suspension culture in an aqueous medium was developed as a novel strategy for accumulation of high concentration of Monascus pigments. Thus, glucose feeding during submerged culture in the aqueous medium was carried out successfully and high orange Monascus pigments concentration of near 4 g/L was achieved.