Use gloves to pick away mushrooms and remove all mulch that has been affected by mold or fungus. Raking every two or three days disrupts mushroom colonies. Using a fungicide to kill mushrooms is another method, but using two tablespoons of baking soda with each gallon of water kills mushrooms without having to use chemicals.
Do It Yourself notes that lime renders the ground less acidic, making it harder for mushrooms to thrive. Spreading fresh mulch over decayed mulch also reduces mushroom formation. Replacing mulch prevents mushrooms from forming, and removing rotting vegetation helps as well. Watering plants at the base reduces wetness on mulch. Limit the mulch layer to 2 inches deep or less. Mulched layers that are over 3 inches deep dry the ground beneath and kill microorganisms that aid in keeping mold at bay. Wetting fresh mulch is a way of allowing good microorganisms to thrive before mold has a chance to form colonies.
SFGate reports that using nitrogen-based elements on mulch helps break down cellulose particles faster, preventing mold formation. Blood meal and certain lawn fertilizers that are high in nitrogen are effective tools to use on mulch.
Using compost instead of mulch stops mushroom growth as well. Mushrooms can also be used as compost since they do not harm plants. Any mulch that has been touched by mushrooms can also be used as compost.