The medicinal macrofungus Inonotus obliquus widely utilized as folk medicine in Russia and Baltic countries is a source of phenylpropanoid-derived styrylpyrone polyphenols that can inhibit tumor proliferation. Insights into the regulatory machinery that controls I. obliquus styrylpyrone polyphenol biosynthesis will enable strategies to increase the production of these molecules. Here we show that Thioredoxin (Trx) mediated transnitrosylation of S-nitrosoglutathione reductase (GSNOR) underpins the regulation of styrylpyrone production, driven by nitric oxide (NO) synthesis triggered by P. morii coculture. NO accumulation results in the S-nitrosylation of PAL and 4CL required for the synthesis of precursor phenylpropanoids and styrylpyrone synthase (SPS), integral to the production of styrylpyrone, inhibiting their activities. These enzymes are targeted for denitrosylation by Trx proteins, which restore their activity. Further, this Trx S-nitrosothiol (SNO) reductase activity was potentiated following S-nitrosylation of Trx proteins at a non-catalytic cysteine (Cys) residue. Intriguingly, this process was counterbalanced by Trx denitrosylation, mediated by Trx-dependent transnitrosylation of GSNOR. Thus, unprecedented interplay between Trx and GSNOR oxidoreductases regulates the biosynthesis of styrylpyrone polyphenols in I. obliquus.