Taiwanofungus salmoneus (T.T. Chang et W.N. Chou) Sheng H. Wu et al. (shiang-shan-chih), is a medicinal fungus indigenous to Taiwan. The mycelium was prepared from submerged culture and its ethanolic and hot-water extracts were used to study its antibacterial and anti-inflammatory activities. Gram-positive species (Bacillus cereus, Listeria monocytogenes, and Staphylococcus aureus) and gram-negative species (Escherichia coli and Salmonella typhimurium) of bacteria were used. In addition to the inhibitory zone, minimum inhibitory concentrations (MICs) and minimum bactericidal concentrations (MBCs) also were determined. The ethanolic extracts showed higher inhibitory and bactericidal activities (MIC and MBC: 6.25-12.50 mg/ml) than the hot-water extracts (MIC and MBC: 25-50 mg/mL). In the anti-inflammatory test, the extracts were tested on lipopolysaccharide-induced nitric oxide and tumor necrosis factor- α production in RAW 264.7 cells. The values of the inhibition concentration at 50% of nitric oxide production were 18.2 and 14.2 μg/mL for the hot-water and ethanolic extracts, respectively. The 50% inhibitory concentration values of tumor necrosis factor- α production were 4.99 and 7.13 μg/mL for the hot-water and ethanolic extracts, respectively. On the basis of the results obtained, the mycelia could be used as an antibacterial and anti-inflammatory supplement.