The goal of this study was to develop a submerged fermentation by Monascus purpureus for converting potato pomace, a low-cost byproduct generated in the potato starch industry, to a high value-added product containing soluble dietary fibers and Monascus pigments. Potato pomace was used directly without any pretreatments or hydrolysis in fermentation by M. purpureus to produce Monascus pigments, which was quantified by monitoring the absorbance of the fermentation broth at 492 nm wavelength and was found to reach a high level of 47.9 OD492/mL with a yield of 598.6 OD492/g pomace. Thermal stability analysis showed that the red pigments produced from potato pomace had a high activation energy of 71.6 kJ mol−1 at pH 5.0, indicating that the red pigment was thermally stable even at an acidic pH. Meanwhile, about 110.9 mg of soluble dietary fibers with porous microstructure, high solubility, and antioxidant activities were obtained from each gram of potato pomace after the fermentation. The results demonstrated the feasibility of converting potato pomace to a valuable product containing Monascus pigments and soluble dietary fibers by M. purpureus in submerged fermentation, providing an economical and environmentally friendly route for utilizing the agro-industrial waste byproduct.