This study was conducted to develop a renewable and sustainable bio-material to replace polystyrene (EPS) in fungal-mycelium-based composite using agricultural by-products. Four mushrooms (Ganoderma lucidum, Fomitella fraxinea, Phellinus linteus, and Schizophyllum commune) were cultured in an oak sawdust plus rice bran substrate to select the mushroom with the best growth. The mycelia of G. lucidum showed the best growth. To investigate the optimal mixing ratio with spent mushroom substrate (SM) and oak sawdust (OS), samples were prepared by mixing SM and OS at ratios of 50%:50%, 60%:40%, and 80%:20% (w/w). Each substrate was then inoculated with G. lucidum. G. lucidum showed the best mycelial growth of 140.0 mm in the substrate with SM and OS mixed at a 60%:40% ratio. It was also found that the substrate with SM and OS mixed at a 60%:40% ratio had the best handling properties. The compressive strength of mycelial materials inoculated with G. lucidum was in the range of 300–302 kgf mm-1, and the materials were four times stronger than polystyrene materials. These results indicate that substrates comprising spent mushroom substrate mixed with oak sawdust can be successfully upcycled to mycelium-based composite materials using G. lucidum. This represents a sustainable approach.