Edible fungi are increasingly regarded as ideal future food source for alternative protein and nutrients. Their bioactive components have been widely recognized for promoting human health and preventing diseases. Among these components, edible fungi active peptides can be obtained from almost any part of edible fungi. This review summarizes current approaches to exact and separate these peptides with the goal of identifying greener and more efficient technologies. In addition to flavor enhancement, fungal peptides can reduce or replace the use of sodium in people’s daily life, thereby contributing to a healthier dietary habit. They also play effectiveness through their regulation of signal pathways and cellular metabolic genes, making them useful as drugs or supplements in both therapy and daily nutrition. Therefore, this review highlights recent advances in peptides from edible fungi, with a focus on their abundant functional activities (e.g. immunity regulation, antitumor, antioxidant and flavor properties) and the underlying mechanisms behind these effects. Importantly, this review is among the first to analyze their potential toxicity. Given their efficiency, sustainability, and nutritional profile, the peptides from edible fungi will have great development and utilization value in the future.