Residues generated during the cultivation of edible mushroom Flammulina velutipes are abundant and utilized with low efficiency. In this study, the composition and bioactivities of a skin substitute named TG05 obtained from residues of the F. velutipes cultivation process were investigated. The main composition of TG05 was considered to be chitin and it inhibited growth of Gram-positive Staphylococcus aureus and Gram-negative Pseudomonas aeruginosa. TG05 also suppressed the inflammatory response through the inducible nitric oxide synthase signaling pathway. Inflammation was attenuated by reducing the expression of tumor necrosis factor-α, interleukin (IL)-1β, IL-6, and prostaglandin E2 at the transcription level. Furthermore, TG05 exhibited antioxidant activities based on hydroxyl, 2,2-diphenyl-1-picryl-hydrazy, 2,2'-azobis-(3-ethylbenzothiazoline-6-sulfonic acid), superoxide anion radical scavenging activity, and reducing power assays. However, the effect of TG05 was independent of hyaluronidase inhibitory activity. Taken together, specific mechanisms related to the notable wound-healing-promoting activity of TG05 were demonstrated, mainly attributable to its antimicrobial, anti-inflammatory, and antioxidant activities. Therefore, TG05 may have potential for use as a functional biomaterial in various applications.