Inonotus hispidus is an anti-tumour drug used in folk medicine. (4S,5S)-4-Hydroxy-3,5-dimethoxycyclohex-2-enone (HDE) is a compound isolated from Inonotus hispidus for the first time. However, the mechanisms underlying its therapeutic effects have not been elucidated. In this study, the in vitro screening, in vivo anti-tumour effects, mechanism of action, pharmacokinetics, and tissue distribution of HDE were investigated. HDE could inhibit the proliferation of HepG2 cells. Additionally, its half-maximal inhibitory concentration was 7.9 µg/mL. Increasing HDE concentrations significantly increased apoptosis rate in a dose-dependent manner. Furthermore, HDE was rapidly absorbed into mouse plasma, reaching a maximum concentration at 30 min. The area under the plasma HDE concentration–time curves for the studied organs were as follows: spleen > liver > lung > kidney > muscle > thymus > heart > brain. HDE also inhibited tumour growth up to 69%. The weights of organs harvested from HDE-treated mice were not significantly different from those harvested from control mice. Furthermore, HDE upregulated Fas expression and downregulated FasL expression in HepG2 cells. HDE significantly increased caspase-3 and caspase-8 activity. The anti-tumour effect of HDE might be realized by activating the Fas-mediated apoptotic pathway. We also found that HDE undergoes enterohepatic circulation or is quickly absorbed by the body, and the drug is released back into systemic circulation. In conclusion, HDE significantly inhibited H22 hepatocarcinoma cells (H22)tumour growth in mice without damaging organs; therefore, it may be suitable for treating liver cancer.