The use of waste apple-wood as a source of sawdust to cultivate the mushrooms Pleurotus ostreatus and Lentinula edodes is a common practice, but it is imperative to ensure that the wood does not contain unsafe amounts of heavy-metals or pesticide residues. In this study, we sampled and investigated the pollution of heavy metals and pesticide residues in apple-wood from Yantai, Shandong, China and cultivated P. ostreatus and L. edodes using apple-wood as substrate. Heavy metals, pesticide residues, mineral elements, and biological efficiency were measured. Heavy metals were more commonly detected in the 73 apple-wood samples, but serious pollution was only an isolated phenomenon. No Pb was detected in P. ostreatus and L. edodes. The contents of Hg, As, Cd, and Cr were at safe levels. The contents of Ni were equivalent to those of wild mushrooms. Most notably, chlorpyrifos was detected in all the apple-wood tested. However, chlorpyrifos was only detected in L. edodes cultivated with apple sawdust. No other pesticide residues were detected in the other mushroom samples. The biological efficiency of P. ostreatus cultivated by apple sawdust was 89%, which was 80% of the control. The biological efficiency of L. edodes cultivated with apple sawdust was 81%, which did not differ significantly from the control. Apple-wood can replace wild oak as the material for L. edodes cultivation, but producers should ensure that the raw materials are safe. The main materials chosen to cultivate P. ostreatus should balance the two factors of raw material price and biological efficiency.