This study aimed to investigate the components, biological activities, and flavor characteristics of Armillaria gallica fermented Gastrodia elata Bl. (FGR) and to explore the changes in bioactive substance contents and biological activities during fermentation stages. Meanwhile, headspace solid-phase microextraction coupled with gas chromatography-mass spectrometry (HS-SPME-GC-MS) was applied to identify the composition of flavor substances in FGR. The results showed that the contents of total polyphenols, total flavonoids, gastrodin (GAS), and p-hydroxybenzyl alcohol (HBA) were generally increased during the fermentation process and reached a stable state after 7 days at (57.67 ± 2.72) mg/mL, (52.09 ± 5.03) mg/mL, (4714.62 ± 45.94) μg/mL, and (2064.73 ± 12.82) μg/mL, respectively. However, the total triterpenoid content decreased to (0.12 ± 0.01) mg/mL. The results of antioxidant and cellular assays demonstrated that the antioxidant capacity of FGR was higher than that before fermentation, and exhibited more significant protective activity on PC12 cells. The sensory profile varied at different fermentation time, and the unpleasant odor of G. elata Bl. was significantly reduced after fermentation. The analysis of the relative contents and odor activity values (OAVs) of volatile substances showed that the contents of unpleasant odor substances (p-cresol, isovaleraldehyde, naphthalene, sulfide, and pyrazine) in FGR were decreased, while the contents of volatile components with pleasant aroma (phenylethanol, isovaleraldehyde, 2,3-hexanedione, and 4-N-propylbenzaldehyde) were increased compared to the unfermented control. A. gallica fermentation could alleviate the unpleasant odor of G. elata Bl. and impart more pleasant mushroom-like, floral, and fruity aromas. This study provides data support for FGR development and utilization.