Mushrooms are a wholesome food that provide ample amount of nutrients including essential amino acids, ions, minerals and vitamins to humans and can be used to compensate for the lack of nutrition and eradicating many health related problems especially malnutrition. Mushrooms also contain secondary metabolites (bioactive compounds) having role in regulating the body’s immune system. With China being the largest producer of mushroom, other countries too are coming together and mushroom production and trade are growing globally. Mushroom farming is easy, feasible, less time consuming and returns good profit margins. The agro waste left after the harvesting can be biodegraded or recycled if they can be used for mushroom cultivation thus, don’t need to be burned. Mushrooms have been nutritionally beneficial to humans for ages by providing many essential nutrients and have been used as medicines by the people of China and Japan. Many other countries and folk people utilized mushrooms as local medicines to treat many diseases and wounds topically. Their value has been recognized and is being exploited in modern medicine as many studies have shown successful results upon animal models and few on human patients. Folklore studies can help rediscover properties and make advancements in molecular medicines and clinical therapies. Current studies indicate that mushroom bioactive compounds regulate the immune system by eliciting immune responses or by interacting with the gut microbiota. Mushrooms also possess properties like anti-cancer, anti-diabetic, antiinflammatory, anti-obesity and anti-neurodegenerative. Although these properties are presently being used for clinical therapies and treatment of various diseases, still there is a dire need for more experiments on the mushrooms and their extracts. This review aims to consolidate understanding of the medicinal and nutritional benefits of mushrooms including nutritional components, bioactive components, mention in folk literature and role today in clinical therapies. Keywords: Agro industry; Edible fungi; Ethnomycology; Malnutrition; Mushrooms; Medicinal effects; Nutritional benefits.