The World Health Organization stated that neurological and neurodegenerative conditions remain a significant health threats due to their profound debilitation. These ailments stem from specific pathological processes affecting both central and peripheral nervous systems, leading to the impairment or death of nerve cells across the body. Medicinal mushrooms offer a wide array of health benefits, exhibiting diverse pharmacological properties such as anti-allergic, anti-oxidative, anti-inflammatory, antiviral, cytotoxic, immune-modulating, antidepressive, antihyperlipidemic, antidiabetic, digestive, hepato-protective, neuroprotective, nephron-protective, osteo-protective, and hypotensive effects. These benefits arise from bioactive compounds such as metal-chelating agents, antibiotics, alkaloids, terpenoids, lactones, lectins, and polysaccharide-protein complexes, or β-glucan, found in medicinal mushrooms. This review explores the current understanding of the neuroprotective effects of bioactive compounds from edible mushrooms and their potential applications in neurogenic diseases. Specifically, we discuss the mechanisms underlying their neuroprotective actions, including modulation of oxidative stress, inflammation, and neurogenesis. Furthermore, we highlight preclinical and clinical studies investigating the therapeutic potential of mushroom-derived compounds in various neurogenic diseases, namely, multiple sclerosis, stroke, and Huntington’s disease. Additionally, we address challenges and future directions in the development of mushroom-based therapeutics, including standardization of extraction methods, optimization of dosages, and exploration of synergistic effects with conventional treatments. Overall, this review underscores the promising role of edible mushroom bioactive compounds as novel therapeutic agents for neurogenic diseases and emphasizes the need for further research to harness their full therapeutic potential.