Circular agriculture is the most efficient use of all waste resources to get a useful product in any agricultural production system. It is the key point in modern farming for long-term sustainability. The main target of recycling agriculture is to protect the environment and enhance food production. In this context, mushrooms are very important as they convert organic waste streams from the food industry or agricultural processing plants into human food, which is rich in protein and dietary fibers. Different substrates materials like cereal straw, coffee grounds, by-products of conventional farming, and organic waste from the sugar, oil, or rice industry are preferred wastes to produce different types of edible mushrooms. This chapter emphasizes the versatility of species such as Oyster and Shiitake mushrooms, which can grow on diverse substrates and offer high nutritional and medicinal value. Additionally, the chapter discusses the environmental, economic, and social benefits of mushroom cultivation, including waste reduction, soil improvement, carbon sequestration, job creation, and community engagement. Different challenges, like contaminations during spawn cultivation, market access, low levels of production technologies, and food habits of the local population, are also discussed in this chapter. However, the need for technological advancements, supportive policies, and public awareness to further integrate mushroom cultivation into sustainable food systems is very important, and there is a dire need to convert useless waste into nutritious food.