Huperzia serrata produces various types of lycopodium alkaloids, especially the huperzine A (HupA) that is a promising drug candidate for Alzheimer's disease. Despite the medicinal importance of H. serrata, little genomic or transcriptomic data are available from the public databases. A cDNA library was thus generated from RNA isolated from the leaves of H. serrata. A total of 4012 clones were randomly selected from the library, and 3451 high-quality expressed sequence tags (ESTs) were assembled to yield 1510 unique sequences with an average length of 712 bp. The majority (79.4%) of the unique sequences were assigned to the putative functions based on the BLAST searches against the public databases. The functions of these unique sequences covered a broad set of molecular functions, biological processes and biochemical pathways according to GO and KEGG assignments. The transcripts involved in the secondary metabolite biosynthesis of alkaloids, terpenoids and flavone/flavonoids, such as cytochrome P450, lysine decarboxylase (LDC), flavanone 3-hydroxylase, squalene synthetase and 2-oxoglutarate 3-dioxygenase, were well represented by 34 unique sequences in this EST dataset. The corresponding peptide sequence of the LDC contained the Pfam 03641 domain and was annotated as a putative LDC. The unique sequences encoding transcription factors, phytohormone biosynthetic enzymes and signaling components were also found in this EST collection. In addition, a total of 501 potential SSR-motif microsatellite loci were identified from the 393 H. serrata leaf unique sequences. This set of non-redundant ESTs and the molecular markers obtained in this study will establish valuable resources for a wide range of applications including gene discovery and identification, genetic mapping and analysis of genetic diversity, cultivar identification and marker-assisted selections in this important medicinal plant.