Mushrooms traditionally collected from forests and now more cultivated have recently become the products of the fifth-largest agricultural sector in China. It was estimated that more than 25 million farmers in China are currently engaged in the collection, cultivation processing and marketing of mushrooms. The total value of mushroom products amounted to 149 billion RMB Yuan (24 billion USD) in 2011. The raw materials have expanded from a few hardwoods to a variety of woods and increasing more into agricultural residues and wastes. The average annual growth rate has been over 10% over the past 30 years in China. This paper describes the rapid growth of mushroom cultivation and its contribution to food security and rural sustainable development. The roles of bio-innovation, technological dissemination, and marketing are also examined. Mushrooms could potentially be very important in future food supplies and in new dimensions of sustainable agriculture and forestry.