Spent mushroom substrates (SMS), a lignocellulosic residue from mushroom cultivation, represent a promising raw material for the valorization of nontoxic materials supporting the circular bioeconomy. The inherent biological pretreatment of the birch wood substrate during shiitake cultivation reduces the need for chemicals prior to fibrillation. SMS was fibrillated using an extruder and a blender at high (28 wt %) and low (5 wt %) solid contents, respectively, with and without a predispersion step. Extrusion proved to be the most energy-efficient method, requiring only 11 kWh/t, compared with 417 kWh/t for blending. When combined with predispersion, extrusion is the second most energy-efficient fibrillation method (789 kWh/t), compared to blending with predispersion (1195 kWh/t). Microscopy and fiber fractionation confirmed fibrillation into microfibers after extrusion and the presence of residual mycelium. Sheet formation by vacuum filtration over a coarse mesh significantly lowered the filtration time compared to a fine filter. Sheets produced from fibrillated SMS possessed tensile strength up to 7.5 times higher than commercial birch kraft pulp sheets prepared under the same conditions. The improved tensile strength is due to the presence of mycelial fibrils, which enhanced fiber–fiber bonding. Overall, extrusion provides a scalable, energy-efficient route for SMS fibrillation for the production of future all-natural materials without the need for chemical modification.