When a dikaryotic mycelium of Coriolus versicolor (Fr.) Quel. (a species of fungi belonging to the genus Coriolus of Polyporaceae) is subjected to a mechanical treatment such as grinding or shearing in a liquid medium, or when such mycelium is subjected to submerged culture while undergoing mechanical treatment, there is produced a monokaryotic mycelium which is different from the dikaryotic mycelium in morphological and physiological characteristics. The thus obtained monokaryotic mycelium is a novel product and characterized by its extremely high propagation rate as compared with the known dikaryotic mycelium. Also, the substance extracted from the culture of the mycelium has excellent physiological activities.