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Arsenic contamination in water and soil is becoming a severe problem. It is toxic to the environment and human health. It is usually found in small quantities in rock, soil, air, and water which increase due to natural and anthropogenic activities. Arsenic exposure leads to several diseases such as vascular disease, including stroke, ischemic heart disease, and peripheral vascular disease, and also increases the risk of liver, lungs, kidneys, and bladder tumors. Arsenic leads to oxidative stress that causes an imbalance in the redox system. Mycoremediation approaches can potentially reduce the As level near the contaminated sites and are procuring popularity as being eco-friendly and cost-effective. Many fungi have specific metal-binding metallothionein proteins, which are used for immobilizing the As concentration from the soil, thereby removing the accumulated As in crops. Some fungi also have other mechanisms to reduce the As contamination, such as biosynthesis of glutathione, cell surface precipitation, bioaugmentation, biostimulation, biosorption, bioaccumulation, biovolatilization, methylation, and chelation of As. Arsenic-resistant fungi and recombinant yeast have a significant potential for better elimination of As from contaminated areas. This review discusses the relationship between As exposure, oxidative stress, and signaling pathways. We also explain how to overcome the detrimental effects of As contamination through mycoremediation, unraveling the mechanism of As-induced toxicity.