Mycoremediation, a phrase coined by Paul Stamets, is a form of bioremediation, a process that uses fungi to degrade or retain contaminants in the environment. By stimulating enzymatic and microbial activity, the mycelium reduces toxins in-situ. Some fungi are hyperaccumulators, capable of absorbing and concentrating heavy metals in the sporocarp.

One of the main functions of fungi in the ecosystem is decomposition, which is carried out by the mycelium. The mycelium secretes extracellular enzymes and acids that break down lignin and cellulose, the two main components of plant fiber. These are organic compounds made up of long chains of carbon and hydrogen, structurally similar to many organic pollutants. The key to mycoremediation is the determination of the specific species of fungus to eliminate a specific contaminant. Certain strains have been reported to have successfully degraded nerve gases such as VX and sarin.

In an experiment conducted together with Dr. S. A. Thomas, a major contributor to the bioremediation industry, a plot was contaminated with diesel and inoculated with oyster mushrooms; Traditional bioremediation techniques (bacteria) were used in the controls. After 4 weeks, more than 95% of the polycyclic aromatic hydrocarbons had been reduced to non-toxic components in the plots inoculated with the fungus. Wood-decomposing fungi are particularly effective at breaking down aromatic contaminants (toxic components of petroleum) as well as chlorinated compounds (certain persistent pesticides).

The concept of mycoremediation was explored in the 1984 film, Nausicaä of the Valley of the Wind "Nausicaä of the Valley of the Wind (film)"), where large expanses of mushroom forests rehabilitate the planet after a human catastrophe due to pollution.

Mycofiltration") is a similar process, using the mycelium of the fungus to filter toxic waste and microorganisms from soil water.[1]​.