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Mushroom fruiting bodies have been used as food and food-flavouring materials for centuries for their unique and subtle flavour. However, the whole cycle from mycelium colonization to the fruit-body formation is time-consuming and involves extensive labour. Submerged cultivation of fungi can be a promising alternative for obtaining potent substances for successful utilization in the composition of functional foods. Submerged culture is a speedy process that yields quality mushroom mycelia, considering the alternative of cultivation that takes much more time to produce fruiting bodies. Moreover, the culturing of mycelia on synthetic media is a convenient approach to obtain fungal biomass. Presence of bioactive components in mushroom mycelium makes it an attractive ingredient that is now used as dietary supplements or nutraceuticals. This review focuses on the optimum growth conditions required by mycelia for enhanced quality and yield prospects along with the biological mechanisms responsible for their therapeutic properties and their applications.