Inotodiol, an oxysterol found only in Chaga mushroom, has received attention from the pharmaceutical industry due to its strong antioxidant and anti-allergic activities. However, the production of inotodiol is still challenging, and its fundamental properties have yet to be investigated. This study aims to develop an efficient method to produce high-purity inotodiol from Chaga mushroom. Then, pure inotodiol was used to assess its physicochemical properties and biological activities. By optimizing the solvent used for extraction and purification, a new method to produce inotodiol was developed with high purity (>97%) and purification yield (33.6%). Inotodiol exhibited a melting point (192.06 °C) much higher than lanosterol and cholesterol. However, the solubility of inotodiol in organic solvents was notably lower than those of the other two sterols. The difference in the hydroxyl group at C-22 of inotodiol has shown the distinctive physicochemical properties of inotodiol compared with cholesterol and lanosterol. Based on those findings, a nonionic surfactant-based delivery system for inotodiol was developed to improve its bioavailability. The inotodiol microemulsion prepared with 1–2% Tween-80 exhibited homogenous droplets with an acceptable diameter (354 to 217 nm) and encapsulation efficiency (85.6–86.9%). The pharmacokinetic analysis of inotodiol microemulsion in oral administration of 4.5 mg/kg exhibited AUC0–24h = 341.81 (ng·h/mL), and Cmax = 88.05 (ng/mL). Notably, when the dose increased from 4.5 to 8.0 mg/kg, the bioavailability of inotodiol decreased from 41.32% to 33.28%. In a mouse model of sepsis, the serum level of interleukin-6 significantly decreased, and the rectal temperature of mice was recovered in the inotodiol emulsion group, indicating that inotodiol microemulsion is an effective oral delivery method. These results could provide valuable information for applying inotodiol in functional food, cosmetic, and pharmaceutical industries.