Mushroom production represents a promising industry with significant economic and environmental benefits and offers a viable strategy for addressing the nutritional deficits prevalent in these regions. Its low capital requirements make it an accessible tool for poverty alleviation and wealth creation, providing extensive job opportunities and contributing to national economic growth. The utilization of agro-forestry waste as raw material for mushroom cultivation aligns with the waste-to-wealth approach, fostering environmental sustainability. Despite the popularity of mushrooms as a food source, most of the mushrooms consumed in developing countries are gathered from the wild. The commercialization of mushroom production, which has the potential to become a sustainable and profitable agro-industrial sector, remains largely untapped, underexplored, underutilized, underexploited, and underrepresented. Various challenges impede the growth of the mushroom industry in developing countries, including socio-economic and cultural barriers, inadequate technical and scientific expertise, lack of supportive government policies, fluctuating market prices, and inefficient marketing systems. However, increased awareness of the nutritional, health, and economic benefits of mushrooms, coupled with the establishment of mushroom farming enterprises, could significantly enhance the industry's visibility and accelerate its industrial development in a short time. This review examines the development and sustainability of mushroom production for nutritional security and national economic development in developing nations, along with its many opportunities and challenges.