Stropharia rugosoannulata is not only a popular edible mushroom, but also has excellent potential in bioremediation. In this study, we present a high-quality genome of a monokaryotic strain of the S. rugosoannulata commercial cultivar in China. The assembly yielded an N50 length of 2.96 Mb and a total size of approximately 48.33 Mb, encoding 11,750 proteins. The number of heme peroxidase-encoding genes in the genome of S. rugosoannulata was twice the average of all of the tested Agaricales. The genes encoding lignin and xenobiotic degradation enzymes accounted for more than half of the genes encoding plant cell wall degradation enzymes. The expansion of genes encoding lignin and xenobiotic degradation enzymes, and cytochrome P450 involved in the xenobiotic metabolism, were responsible for its strong bioremediation and lignin degradation abilities. S. rugosoannulata was classified as a litter-decomposing (LD) fungus, based on the analysis of the cell wall degrading enzymes. Substrate selection for fruiting body cultivation should consider both the nutritional strategy of LD and a strong lignin degradation ability. Consistent with safe usage as an edible mushroom, the S. rugosoannulata genome does not contain genes for known psilocybin biosynthesis. Genome analysis will be helpful for understanding its nutritional strategy to guide fruiting body cultivation and for providing insight into its application in bioremediation.