Municipal organic wastes could be exploited as fertilizers, having been given the ability to suppress plant diseases by the inoculation of the waste with certain fungi in the composting process. Our aim was to develop a novel fertilizer using composting in combination with fungi associated with mangrove forests. Nine fungal species were isolated from a mangrove forest habitat and screened for their activity against five phytopathogenic fungi, their plant-growth promotion ability, and their phosphate solubilization ability. Two fungal isolates, Penicillium vinaceum and Eupenicillium hirayama, were inoculated into organic waste before the composting experiment. After 90 days, the physico-chemical properties of the compost (color, moisture, pH, C:N ratio and cation exchange capacity (CEC)) indicated the maturity of the compost. The C:N ratio decreased and the CEC value increased most in the compost with the inoculum of both mangrove fungi. The vegetable plants grown in the mangrove fungi-inoculated composts had a higher vigor index than those grown in the control compost. The seeds collected from the plants grown in the fungi-inoculated composts had higher disease defense ability than the seeds collected from the control compost. The results indicated that the properties of the fungi shown in vitro (antagonistic and plant-growth promotion) remained in the mature compost. The seeds of the plants acquired disease defense ability, which is a remarkable observation that is useful in sustainable agriculture.