This paper describes Omphalotus olearius , a large toxic mushroom growing in dense cespitose clusters on tree stumps in Kathmandu valley, Nepal. This species is new for the mycological flora of Nepal and maybe for the Indian subcontinent as it is not yet recorded in Indian fungi indexes. This species is very toxic and could be mistaken with Cantharellus cibarius , an edible mushroom. It is important to advise people of its presence in the mushroom growing habitats of Kathmandu valley. If eaten, the patient exhibits symptoms of nausea, violent vomiting, epigastric pains, cold sweats, etc.