In this study, the functional properties of a mixture consisting of Tremella aurantialba powder (TAP) and wheat flour were investigated. Further, the effects of adding 0%, 1%, 3%, 5%, and 10% TAP on the physical properties of bread, as well as its glucose release, microstructure, and rheology during in vitro simulated digestion were studied. The water‐holding, oil‐holding, and swelling capacities of wheat flour were significantly enhanced (p < 0.05) with the increase of TAP. The addition of TAP increased the hardness, chewiness, gumminess, and moisture content and darkened the color of the bread. Sensory evaluation showed that adding the 3% of TAP could produce bread that satisfies the requirements of consumers. Furthermore, adding TAP could inhibit the release of glucose from the digesta into the dialysis solution, especially the addition of 10% TAP reduced the release of bread glucose by 23.81%. This phenomenon might be related to the increased viscosity of the digesta and the smooth physical barrier on the surface of starch granules during simulated in vitro digestion of bread. Therefore, as a natural food, T. aurantialba has great potential in improving the functional properties of bread and the application of starch matrix products.