Fungal nanochitin can assist the transition from the linear fossil-based economy to a circular biobased economy given its environmental benefits over conventional crustacean-nanochitin. Its real-world implementation requires carefully assessing its toxicity so that unwanted human health and environmental issues are avoided. Accordingly, the cytotoxicity and inflammatory effects of chitin nanofibrils (ChNFs) from white mushroom is assessed. ChNFs are few nanometers in diameter, with a 75.8% N-acetylation degree, a crystallinity of 59.1%, and present a 44:56 chitin/glucan weight ratio. Studies are conducted for aqueous colloidal ChNF dispersions (0-5 mg·mL-1) and free-standing films having physically entangled ChNFs. Aqueous dispersions of chitin nanocrystals (ChNCs) isolated via hydrochloric acid hydrolysis of α-chitin powder are also evaluated for comparison. Cytotoxicity studies conducted in human fibroblasts (MRC-5 cells) and murine brain microglia (BV-2 cells) reveal a comparatively safer behavior over related biobased nanomaterials. However, a strong inflammatory response was observed when BV-2 cells were cultured in the presence of colloidal ChNFs. These novel cytotoxicity and inflammatory studies shed light on the potential of fungal ChNFs for biomedical applications.