Mushrooms have been recognized for their culinary attributes for long and were relished in the most influential civilizations in history. Currently, they are the focus of renewed research because of their therapeutic abilities. Nutritional benefits from mushrooms are in the form of a significant source of essential proteins, dietary non-digestible carbohydrates, unsaturated fats, minerals, as well as various vitamins, which have enhanced its consumption, and also resulted in the development of various processed mushroom products. Mushrooms are also a crucial ingredient in traditional medicine for their healing potential and curative properties. The literature on the nutritional, nutraceutical, and therapeutic potential of mushrooms, and their use as functional foods for the maintenance of health was reviewed, and the available literature indicates the enormous potential of the bioactive compounds present in mushrooms. Future research should be focused on the development of processes to retain the mushroom bioactive components, and valorization of waste generated during processing. Further, the mechanisms of action of mushroom bioactive components should be studied in detail to delineate their diverse roles and functions in the prevention and treatment of several diseases.