This study presents a combined experimental and analytical study of the fracture behavior and toughening mechanisms of bioprocessed mycelium-based biocomposites. The composites comprise hemicellulose hemp ducts (as nutritional and reinforcing components) intertwined with increasing weight percentages of laterite particles. Single-edge notched fracture experiments and in-situ observations of crack growth were used to explore the effects of varying proportions of laterite on the composite resistance-curve behavior. The toughening mechanisms, fracture modes, and crack-microstructure interactions were also elucidated. Since crack-bridging and crack-deflection were observed to be the dominant toughening mechanisms, they were modeled using fracture mechanics approaches. Crack-bridging was shown to dominate the toughening at lower weight fractions of laterite (0–20 wt%). However, as the laterite content increases (20–40 wt%), a combination of crack-bridging and crack-deflection was observed. Finally, at higher laterite weight fractions (>40 wt%), crack-tip shielding occurred primarily via crack deflection. The fracture mechanics predictions of resistance-curve behavior are shown to be consistent with the experimental measurements. The results suggest that mycelium-based and mycelium-laterite composites can be engineered with tunable fracture toughness. The implications of the results are also discussed for the development of sustainable building materials.