Abstract: Total 18 strains of bacteria have been isolated from the compost of strawmushroom, among which 9 strains with N-fixing activity. The selected 864 strain has the character to improve the twist of mycelium and the development of fruit body of strawmushroom. The study on its functional mechanism showed that, 1. It increases the fermentation temperature, alters the microorganism flora in culture medium, increases the amounts of total N, P and K, thus optimized the culture medium; 2. It can fix nitrogen from air, N-fixing activity reaches 0.43 nmol C2H4/vial. hour; 3. The bacterial excretion twists bean sprouts for 0.5 to 1 ring, suggested the exist of hormone substrate; 4. The culture solution contain polysaccharide, protein, and vitamines which may improve the nutrition condition for mushroom growth.