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This study aimed to develop the eco-friendly production of bioactive 1-hydroxyphenazine (HP) through fermentation using an industrial processing by-product of cassava as the main carbon/nitrogen source. Cassava starch processing by-product (CSPB) was screened as a suitable substrate for fermentation to produce HP with a high yield. Mixing CSPB with a minor amount of tryptic soy broth (TSB) at a ratio of 8/2 and with 0.05% K2HPO4 and 0.05% FeSO4 was effective in HP production by Pseudomonas aeruginosa TUN03. HP was also further scaled up through production on a bioreactor system, which achieved a higher level yield (36.5 µg/mL) in a shorter fermentation time (10 h) compared to its production in the flask (20.23 µg/mL after 3 days). In anti-fungal activity tests against various Fusarium phytopathogens, HP exhibited the most significant effect on Fusarium oxysporum F10. It could inhibit the mycelial growth of this fungus, with an inhibition rate of 68.7% and anti-spore germination activity of up to 98.4%. The results of the docking study indicate that HP effectively interacted with the protein 1TRY targeting anti-F. oxysporum, with all obtained docking parameters in the accepted range. This study supports the novel use of CSPB as the carbon/nitrogen source for P. aeruginosa fermentation to produce HP, a F. oxysporum anti-fungal agent reported here for the first time.