Hericium erinaceus (HE) is a fungus inhabiting the mountainous areas of the northeast territories in Asia. HE has been used in traditional folk medicine and medicinal cuisine in China, Korea and Japan. Evidence has been adduced for a variety of physiological effects, including anti-aging, anti-cancer, anti-gastritis, and anti-metabolic disease properties. Hence, HE is an attractive target resource for developing not only medicines, but also functional foods. Basic studies on the physiological functions of HE and on the chemical identification of its active ingredients have progressed in recent decades. In this article, we provide an overview of the biochemical and pharmacological studies on HE, especially of its antitumor and neuroprotective functions, together with a survey of recent developments in the chemical analysis of its polysaccharides, which comprise its major active components.