Some factors influencing Oyster fungus, Pleurotus ostreatus (Jacq. Ex. fr) Kummer, development on rice straw were investigated. Generally grinding method yielded better results concerning Oyster yield, biological efficiency and substrate dry matter loss than chopping method. P. ostreatus mushroom also grew faster on the ground straw, than on the chopped straw, with their growth cycles being shorter than on the chopped straw. No significant difference was found between the two sizes, 2.5 and 5.0 cm, of the chopped straw. Further reduction of the particle size by grinding the straw to 0.5 cm, however, resulted in lower mushroom yield. With the tested spawn levels, 6% and 9% levels (on the basis of dry weight of organic matter) resulted in significantly lower mushroom yield than the other levels. Spawn level 12% (on the basis of dry weight of organic matter) enhanced mushroom yields. Inoculation with Pseudomonas fluorescence had beneficial impact for mushroom production and biological efficiency. P. fluorescence inoculum appreciably reduced total number of days for cultivation of about 2 days compared with uninoculated treatments. The crude protein content reached 6.14 g/100 g dry matter basis of spent rice straw. The fungal cultivation reduced (p<0.05) the cellulose content of the rice straw. Hemicellulose content in spent rice straw showed a similar trend. Organic matter content decreased from 80.15 to 64.20 g / 100 g dry matter basis.