Mushrooms are emerging as powerful neuroprotective food, offering substantial benefits in cognitive health while preventing neurological disease through their rich composition of phytochemicals, including triterpenoids, polysaccharides, ergothioneine, and beta-glucans. These compounds control ROS that reduces oxidative stress, synaptic plasticity, neuroinflammation, and enhances mitochondrial function, motivates neuronal survival that balances neurotransmitter functions while mitigating neurodegenerative progressions related to cognitive decline, Parkinson’s, and Alzheimer’s disease. Mushrooms have the capacity to control the gut–brain axis that supports cognitive function by increasing dopamine and serotonin production through prebiotic interactions with probiotics. Additionally, mushrooms trigger autophagy pathways that reduce the formation of amyloid plaque and also lower the aggregation of tau proteins, which are both critical components in neurodegeneration. While their part in the food industry remains significant for functional food production that aids in clinical nutrition, their potential in personalized nutrition, drug–nutrient interactions (can replace mood enhancers or had sedative properties), and therapeutic dietary interventions is expanding day-by-day, paving the way for targeted or specialized strategies in personalized therapies and neuroprotective treatments. Advancements in biochemical extraction techniques enhance bioavailability optimization of its active compounds, and nutrigenomic integration will be crucial to fully harness their cognitive benefits. These advancements help establish proven guidelines for mushrooms and its bioactive compounds in preclinical, personalized, and nutritional therapies.