Fruiting body formation in Agaricomycetes represents the most complex and unclear process in the fungi. Mating type pathways (matA and matB) and transcription factors are important regulators in the process. Here, we report a new High-mobility-group (HMG) box domain protein FvHmg1 that acts as a negative transcription regulator in fruiting body development in Winter Mushroom Flammulina velutipes. However, the expression of Fvhmg1 in dikaryon and primordial stages was significantly lower than that of monokaryon. The Fvhmg1-RNAi mutants had a better ability of fruiting than wild type strain. Overall expression of Fvhmg1 was controlled under compatible matA and matB genes where compatible matA genes could increase its expression level, while compatible matB genes had the opposite effect. It means when two monokaryons with compatible matA and matB genes were crossed, the negatively transcription factor FvHmg1 was inhibited, and normal fully fruiting body could formation and develop. The relationship between FvHmg1 and mating type pathway would advance to understand of sexual reproduction and fruiting body development in edible mushrooms.