Yunnan Province is one of the rich biodiversity hotspots with abundant resources of lignicolous freshwater fungi. A total of 281 species of lignicolous freshwater fungi from 1986 to the present in Yunnan Province. They are mostly distributed in the classes Dothideomycetes and Sordariomycetes, a few species in the Eurotiomycetes and Leotiomycetes, and rarely reported in Orbiliomycetes and Pezizomycetes. Lignicolous freshwater fungi can decompose lignocellulose substrates and release energy and nutrients, and thus playing an important role in freshwater environment. This study briefly reviewed the biodiversity and taxonomic status of lignicolous freshwater fungi in Yunnan, the ecological functions of lignicolous freshwater fungi, factors affecting community distribution, application status, and research difficulties.