To achieve the Sustainable Development Goals (SDGs), thereby meet the post 2020 global biodiversity targets and increase resilience to climate change, nature-based approaches such as ecosystem-based adaptation (EbA) is suggested as a promising and integrated adaptation strategy. EbA comprises adaptation strategies that value the role of ecosystems in reducing social vulnerability to climate change. Among the different biological groups on earth, fungi play not only an important role to maintain the biogeochemical cycle/nutrient cycle in ecosystems (supporting and regulating services), but also contribute to the socio-economic and cultural benefits of societies (provisioning and cultural services). Here, we present our knowledge and scientific understanding on how these neglected groups of biodiversity-fungi are crucial for ecosystem-based adaptation (EbA) approach based on our field experience, review and associated expertise on caterpillar fungus (Ophiocordyceps sinensis), and other wild mushrooms found in Nepal. Several species of fungi are used by local communities as food, medicines, and environmental income. Fungi are important sources of household income for mountain communities in Nepal providing a cushion during shocks and disasters and supporting food security, health care, education and building shelter. For the holistic EbA approach, it is essential to strengthen local institutions as well as indigenous local knowledge which could be an important policy intervention for the identification, conservation, and sustainable management of ecologically, socially and economically useful fungal species.