Recent interest in the utilization of mushroom-based bioactive compounds has increased due to their potential bioactivities and as alternatives in the reduction of high concentrations of chemical utilization. Therefore, we evaluated the physicochemical, functional, antimicrobial, and anti-inflammatory activity of the Calocybe indica. The nutritional composition of the mushroom was found to be a good source of proteins (12.48%) and fiber (6.87%). Polysaccharide and protein moiety showed both hydrophilic and hydrophobic domains and the sample showed higher water (3.01 g/g), oil binding (2.45 g/g) emulsifying (68.94), and foaming properties (59.39%). Structural characterization revealed the porous and small crystalline structure of the mushroom powder. Ethanolic extract was quantified for total phenolics and flavonoids and revealed 11.1534 ppm caffeic acid, 0.057 ppm syringic acid, 1.6385 ppm p-coumaric acid, and 0.3495 ppm rutin, respectively. Presence of ethyl tridecanoate, hexadecanoic acid ethyl ester, pentadecanoic acid ethyl ester, undecanoic acid ethyl ester, N, α, α ′-trimethyl diphenethylamine, nicotinonitriles, phosphonic acid decyl-, 1-hexyl-2-nitrocyclohexane, diallyl divinylsilane, 3phenyl-pyrrolo(2,3-β) pyrazine was confirmed during GC-MS analysis. Furthermore, the mushroom extract showed effective antimicrobial against Gram-positive (23.67 mm) and negative bacteria (20.33 mm) in terms of zone of inhibition. Significantly comparable anti-inflammatory activity was observed for mushroom extract during protein denaturation (43.72-85.69%) and membrane stabilization. In conclusion, the mushroom extract has shown good functional properties and potential bioactivity, therefore, it can be scaled up as an effective food preservative, potential anti-inflammatory, and antimicrobial agent at the industrial level.