In the present study, Chitin has been extracted from Agaricus bisporus (Button mushroom). The obtained chitin was converted into the more useful chitosan and the crude chitosan extract was measured for its absorption maxima by UV Spectrophotometer and the maximum peak at 265nm was observed. FT-IR spectroscopy was done to identify the functional groups present in the chitosan which was analyzed between the ranges of 4000-400 cm-1. Chitosan was characterized by significant amide bands at 3265.49 cm −1. The absorbance bands of 1402.25, 1153.43, 900.76 and 445.56 cm-1 indicates CH2 stretching, CH stretching, C=O stretching in secondary amide respectively which confirms the structure of chitosan. The antioxidant activity of chitosan was determined by DPPH free radical scavenging assay and the value gained is 65.90% at 250 mg/ml which is due to the presence of rutin, gallic acid, caffeic acid and catechin in the phenolic composition of Agaricus bisporus. Finally, in vitro antibacterial screening of chitosan from Agaricus bisporus was performed against selected clinical isolates and the zone of inhibition shows highest activity in Bacillus subtilis, P. aeruginosa followed by K. pneumonia, and Acinetobacter baumannii. These findings suggest that the Agaricus bisporus act as the potential source to produce eco-friendly chitin and chitosan in the development of drugs, artificial bone and raw material for food industries in near future.