The mystery phenomenon of fungal bioluminescence has always captivated human curiosity, although more attempts need to be made, particularly to bring the new species to the surface. In this study, we devoted considerable space to the taxonomy of these fungi while discussing their biogeography, evolution, bioluminescence mechanism, and potential ecological roles. We provide a detailed explanation of how these fungi produce light, including the role of the enzyme luciferase and luciferin. We also discussed their applications. Here, we presented an updated list of 122 bioluminescent fungi identified from five distinct evolutionary lineages viz. Armillaria, Eoscyphella, Lucentipes, Mycenoid, and Omphalotus worldwide, mainly in tropical and subtropical areas. The bioluminescent fungi descended from the last common ancestor of the mycenoid and the marasmioid clades of Agaricales, which have been maintained for at least 160 million years of evolution. We highlighted the need for further research to understand the ecological role of bioluminescent fungi. Applying bioluminescent fungi in various areas (e.g., environmental and medicinal) demonstrates their validity.