Abstract: Flammulina velutipes strain 8903 was used in the evaluation of the commercialization of the mushroom’s bag-cultivation and processing.The results showed that F. velutipes was poor in utilizing the nutrients in untreated sawdust,its hypha tended to produce yellow exudate,its stipes turned straw-yellow in color,the bag opening was 5-7 days later than the control,its fruit body radicle was straw-yellow in color,had low yield and poor quality.On the other hand,the fresh bagasse was rich in nutrients and could produce F. velutipes fruit bodies with higher yield and better quality than the bagasse,which had been stacked outdoor for a long time.The 14cm-height composting in the fungus bag(17.5 cm×38 cm×0.055 cm)was sufficient for F. velutipes’ nutritional requirement.Illumination(40w florescent lamp)for 20-24 h improved the shape,yield and quality of the mushroom.F. velutipes was more sensitive to yellow light followed by green light,but not to red light.Thus,yellow light induction would produce the best effects compared to other light.