Ethnopharmacological relevance: Several aromatic plants and their essential oils are known to possess antimicrobial and anti-inflammatory properties. Distichoselinum tenuifolium (Lag.) Garcia Martin & Silvestre, an Iberian endemism, is traditionally used in the treatment of contact dermatitis and skin infections. However, the cellular mechanisms through which this plant exerts their beneficial effects are not known. Aim of the study: The aims of this study were to examine the chemical composition of the essential oil isolated from Distichoselinum tenuifolium, and to test the efficacy of the essential oil as an antifungal and anti-inflammatory potential. Materials and methods: The oils were investigated by gas chromatography (GC) and gas chromatography–mass spectrometry (GC–MS) and the antifungal activity (minimal inhibitory concentrations: MIC and minimal lethal concentrations: MLC) were evaluated against yeasts, dermatophyte and Aspergillus strains. Assessment of cell viability was made by the 3-(4,5-dimethylthiazol-2-yl)-2,5- diphenyltetrazolium bromide (MTT) assay and the in vitro anti-inflammatory potential of Distichoselinum tenuifolium oil was evaluated by measuring nitric oxide (NO) production induced by LPS, in the absence or in the presence of the oil, in a mouse macrophage cell line. Results: The oils are predominantly composed of monoterpene hydrocarbons, being myrcene the main compound (47.7–84.6%). The oils revealed significant antifungal activity against Cryptococcus neoformans and dermatophyte strains and significantly inhibited NO production stimulated by LPS in macrophages, without affecting cell viability at concentrations ranging from 0.64 L/mL to 1.25 L/mL. Conclusion: These findings add significant information to the pharmacological activity of Distichoselinum tenuifolium essential oils, specifically to its antifungal and anti-inflammatory properties, thus justifying and reinforcing the use of this plant on traditional medicine. Therefore, their beneficial effects and use in disease prevention, especially those related to fungal infections and inflammation, should be explored in more depth.