Fungus-based cosmetics are an emerging trend in response to consumer demand for natural, bioactive, and sustainable ingredients. Mushrooms and fungi are rich in bioactive compounds such as polysaccharides, proteins, lipids, phenolic compounds, and terpenoids, which offer dermatological benefits. These compounds exhibit antibacterial, hydrating, anti-inflammatory, and antioxidant properties, making fungi ideal for skincare applications. Additionally, fungal melanin provides a natural alternative to synthetic pigments, addressing concerns over environmental harm and skin irritation caused by artificial colorants. Beyond skincare, fungi are also used in hair care. Fungal-derived oils and enzymes improve scalp health and enhance hair strength and shine. Biopolymers like beta-glucans contribute to skin barrier repair, hydration, and wound healing. Fungal fermentation further increases the bioavailability and efficacy of cosmetic ingredients while reducing the need for artificial additives and preservatives. Sustainability is a key advantage of fungal-based cosmetics. Cultivating fungi on agro-industrial waste minimizes environmental impact, aligning with the circular economy and meeting consumer demand for ethical, eco-friendly products. However, challenges remain, including standardizing fungal extracts, navigating regulatory approvals, and ensuring product safety. This book chapter explores the biological properties of fungal compounds, their cosmetic applications, and how fungal biotechnology can transform the beauty industry. It also highlights the challenges and opportunities in this growing field, emphasizing the need for interdisciplinary collaboration among dermatologists, mycologists, and cosmetic scientists to unlock the full potential of fungi in cosmetics.