Agrocybe cylindracea dietary fiber (ADF) contains 95% water-insoluble dietary fiber, resulting in poor application performance. To address this issue, ADF was modified by four methods (cellulase, sodium hydroxide, high-temperature, and Lactobacillus fermentation) in this paper. By comparing the physicochemical properties, microstructures, monosaccharide compositions, and functional characteristics (antioxidant and α-glucosidase inhibitory activities in vitro) of all modified ADF samples, the optimal modification method was selected. Results showed that sodium hydroxide treatment was deemed the most effective modification method for ADF, as alkali-treated ADF (ADF-A) revealed a higher oil-holding capacity (2.02 g/g), swelling capacity (8.38 mL/g), cholesterol adsorption (6.79 mg/g), and α-glucosidase inhibitory activity (more than 70% at 0.4-0.6 mg/mL) than the other modified samples. The looser microstructure in ADF-A might be attributed to molecular rearrangement and spatial structure disruption, which resulted in smaller molecular sizes and decreased viscosity, hence improving ADF's physicochemical and functional qualities. All these findings indicate the greater application potential of modified ADF products in food and weight-loss industries, providing a comprehensive reference for the industrial application of ADF.