Abstract The physiochemical characteristics include: density, solubility, viscosity, molecular weight, degree of deacetylation and functional properties like fat and water binding capacity were studied for chitosan that prepared from chitin of Agaricus bisporus mushroom, the chitosan prepared by treatment of chitin with 47% alkaline solution at 60°C remove 4 hour −1 . The yield of chitin extract from chitosan showed that the chitin extraction rate was 16% based on the dry weight of the fungus. Chitosan, which was produced in this study, was diagnosed by Fourier Transform Infrared Spectrophotometer (FTIR) method. The degree of deacetylation (DD%) of the chitosan produced from the fungus it was 71.5% chitosan showed viscosity of 5.5 centipoise the viscosity has been estimated when chitosan dissolved in 1% acetic acid solution. The molecular weight of the fungus chitosan was 604,610 Dalton. The chitosan was characterized by high solubility (72%) in 1% acetic acid solution and showed high water binding capacity and fat binding capacity were 674%, 257% respectively of the fungal chitosan.