The environment is a life support system and it significantly influences the living organisms and their genes. Decomposers and microorganisms play a major role in maintaining the sustainability of the environment by converting toxic products into a mineralized form and maintaining the nutrient cycle. It is estimated that 62% of the 22 million tons of surplus rice straw is burnt in the field every year and contributes significantly to the black carbon emission from biomass burning. This alarming situation calls for a sustainable approach in crop residue management. Mushroom cultivation offers one such approach. Mushroom farms can act as disposal sites of agriculture residue and at the same time produce quality protein to meet the increasing protein demand. The macro fungi can play a major role in synthesis of non-toxic metal nano-particles from their salts and degradation of diverse crop residues through various enzymes present in them such as ligninases, cellulases, and laccases. Their role also extends to degrading the pesticides and persisting chemicals. This chapter explains the recent advances in mushrooms for effective crop residue utilization.