pH of oriental medicine sludge was 5.3, which was similar to 5.2 of the main ingredient, corncob. Its sugar content, however,was 4.8 mg/g, which was 2.5 times higher than concorb's 1.9 mg/g. According to the addition content analysis of oriental medicine sludgeby using blood agar plate, the experimental group showed much more robust growth than the control group. 10% of oriental medicinesludge was added to corncob and pine tree sawdust for test-tube culture. Then they were cultivated at 25oC for 6 days after inoculatingFlammulina velutipes liquid spawn. The control group and experimental group showed 2.2~3.4 and 5.8~6.4 cm hypae growthsrespectively. At the field test for 10% herbal medicine refuse, mushroom yield dropped by 5% compared to the control group. However,it had distinctively lower number of deformity and the 2nd grade products. An economic analysis was conducted based on the cultivationfacility that produces 160,000 mushrooms per day. The analysis demonstrated that the facility can save 50,000,000 won in the startingyear and 130,000,000 won in the following years from the unit cost of production excluding labour and operation cost.