Agaricus blazei is well known as a traditional medicinal mushroom and it has been shown to exhibit immunostimulatory and anti-cancer activity. However, the cellular and molecular mechanism of cell cycle arrest and apoptosis of cancer cells is poorly understood. In this study, we have investigated whether A. blazei extract (ABE) exerts anti-proliferative and apoptotic effects on human gastric epithelial AGS cells. It was found that ABE could inhibit cell growth in a dose-dependent manner, which was associated with the arrest of G2/M phase and the induction of apoptotic cell death. Flow cytometric analysis showed that ABE could cause an arrest at the G2/M phase of the cell cycle, which is closely correlated to decreased cyclin B1 and cdc2 levels. Furthermore, this compound induced apoptosis through up-regulation of Bax and the activation of caspases with down-regulation of XIAP and cIAP-1, but not cIAP-2, and a capase-3 inhibitor could block cell death and apoptotic body formation. These data clearly indicate that ABE-induced apoptosis is associated with caspase-3 activation. In summary, the growth inhibition of ABE is highly related to cell cycle arrest at the G2/M phase and the induction of caspase-3-dependent apoptosis in human gastric epithelial AGS cells.