An extract of red yeast rice, which gives Peking duck its distinctive color, cuts cancer death rates by two-thirds and heart disease by a third.
The compound could now be developed into a new treatment, potentially saving millions of lives.
One scientist involved in the study, which focused on thousands of patients, described the results as "profound."
The new study showed that health benefits from the extract, which has been used in Chinese medicine for a thousand years, even outperformed cholesterol-lowering drugs known as statins.
When given to heart disease patients, researchers found that it reduced their chances of a repeat heart attack by 45%.
It also cut the need to undergo bypass surgery or artery treatment by a third.
Although the study focused mainly on patients suffering from heart disease in China, the numbers of cancer deaths were also recorded.
Each day patients took either two 300mg capsules of a partially purified extract of a red yeast rice preparation x uezhikang (XZK) or a placebo. Their progress was compared for five years.
Dr. David Capuzzi, who co-led the study, said, "If further testing and study prove true, my hope is that XZK becomes an important therapeutic agent to treat cardiovascular disorders and in the prevention of disease.
"It is important to recognize we do not know exactly how Chinese red yeast rice works.
"Still the results were so profound, even out-performing statins prescribed in numerous western populations, that further study should be investigated."
Doctors currently prescribe statins for heart disease, Britain's biggest killer, to prevent a build-up of fatty deposits in the arteries.
Red yeast rice has been used in China for thousands of years as a preservative and also as a herbal medicine for over 1,000 years.
It is the coloring ingredient used widely in Chinese food and is found in pickled tofu, Peking duck and some types of red-colored Japanese sake. The rice is fermented by adding a red yeast, monascus purpureus, with alcohol before removing the rice gluten.
When used medicinally, it has been known to improve blood circulation and aid digestion. The rice is popular in the Far East, where locals are thought to eat between 14-55g of it a day.
However, this is still 10 times lower than that given in pillform to patients in the trial.
Capuzzi, director of the cardiovascular disease prevention program at Thomas Jefferson University in Philadelphia, led the study with Dr Zonliang Lu, from the Chinese Academy of Medical Science, in Beijing. Their findings were reported in the American Journal of Cardiology.
However, Capuzzi said the capsules used in the study were carefully prepared for the research and are not the same as red yeast rice supplements available in health food stores.
Doctors warned people against taking large amounts of the rice over fears that too much can cause liver damage.
Anyone with heart problems are advised not to take the product without talking to their doctor first.
From the June 23, 2008, Prepared Foods e-Flash