The production of pellets of the fungus Agaricus campestris NRRL 2334 was studied in submerged fermentation with peat extract as the main substrate source. Pellets up to 6 mm in diameter were obtained when the peat extract was diluted to reduce the concentration of growth inhibitors. Yeast extract and yeast extract plus glucose were the most effective nutrient supplements in the diluted peat extract media and stimulated the formation of large pellets which contained 44.4% crude protein, 2.8% fat, and 9% ash (dry weight basis). No solid supports were required for the growth of the pellets. The effects on the growth morphology of several dilution ratios of the peat extract, rates of agitation and aeration, and time were investigated.