Mushroom waste can account for up to 50% of the total mushroom mass. Spent mushroom substrate, misshapen mushrooms, and mushroom stems are examples of mushroom byproducts. In ancient cultures, fungi were prized for their medicinal properties. Aqueous extracts containing high levels of β-glucans as functional components capable of providing prebiotic polysaccharides and improved texture to foods have been widely used and new methods have been tested to improve extraction yields. Similarly, the addition of insoluble polysaccharides controls the glycemic index, counteracting the effects of increasingly high-calorie diets. Numerous studies support these benefits in vitro, but evidence in vivo is scarce. Nonetheless, many authors have created a variety of functional foods, ranging from yogurt to noodles. In this review, we focus on the pharmacological properties of edible mushroom by-products, and the possible risks derived from its consumption. By incorporating these by-products into human or animal feed formulations, mushroom producers will be able to fully optimize crop use and pave the way for the industry to move toward a zero-waste paradigm.