China is the most important country for edible mushroom production, and the total yield of edible mushroom in China ranks first in the world. Peptides are one of the important bioactive components and typical taste compounds in edible mushroom, but the mechanism underlying the functional activity and flavor formation of edible mushroom peptides are still unclear at present. Meanwhile, the lack of standardized and industrialized production and processing technologies seriously restricts the rapid and healthy development of the edible mushroom peptides industry. The peptides preparation from different edible mushroom materials such as edible mushroom fruiting body, mycelium, and by-products from mushroom production or processing were expounded, and many advantages such as short cycle, low cost, and easy regulation for the preparation of edible mushroom peptides using biological fermentation method were revealed, which would develop to be an important approach for the exploitation of edible mushroom peptides products. However, it was complex and difficult to be industrialized for pure edible mushroom peptides separation and purification using gel chromatography and reverse phase high performance liquid chromatography (RP-HPLC). At present, the health function researches of the edible mushroom peptides mostly focused on the antihypertensive effect by inhibiting angiotensin-converting enzyme (ACE) activity. Although the researches on the activities of antioxidation, anti-inflammatory, immune regulation and neuroprotection of edible mushroom peptides had been involved, these researches were not systematic and deep enough. The health function of edible mushroom peptides needs to be further explored. Because of the weak flavor, edible mushroom peptides were mainly used together with traditional monosodium glutamate, nucleotides and amino acids. Typical flavor peptides from edible mushroom needs to be fully exploited, and the preparation of edible mushroom flavor peptides with high efficiency, low cost and strong flavor will be an important breakthrough to improve the utilization of edible mushroom peptides. At the same time, edible mushroom peptides with some functional characteristics such as preservation, antibacterial and antiviral effects, and toxic effects were proved. It will become the most promising research field for edible mushroom peptides to establish the information database of peptides characteristics from different raw materials, construct the engineering bacteria with high efficiency of peptide biotransformation, establish the edible mushroom cells factory qualified with specific functional peptides, and realize the industrialization upgrading of the green biomanufacturing key technology of edible mushroom peptides.