It can reproduce at relatively low temperatures, an adaptation believed to improve its ability to grow quickly and fruit on decomposing mushrooms.

In his Systema Mycologicum, Fries classified it in his "tribe" Collybia along with all other similar small, white-spored species with a convex cap and a fragile stem.

Based on these results, as well as differences in characteristics such as the presence of unique stem projections, fruit body pigmentation, and macrochemical reactions, they circumscribed the new genus Dendrocollybia to contain C. racemosa.

[12] The cap of Dendrocollybia racemosa is typically between 3 and 10 mm (0.1 and 0.4 in) in diameter, and depending on its stage of development, may be conic to convex, or in maturity, somewhat flattened with a slightly rounded central elevation (an umbo).

The margin is usually curved toward the gills initially; as the fruit body matures the edge may roll out somewhat, but it also tends to fray or split with age.

[14] The gills are relatively broad, narrowly attached to the stem (adnexed), spaced closely together, and colored gray to grayish-tan, somewhat darker than the cap.

These projections are cylindrical and tapering, with ends that are covered with a slime head of conidia (fungal spores produced asexually).

[16] The sclerotium from which the stem arises is watery grayish and homogeneous in cross section (not divided into internal chambers), with a thin dull black outer coat, and measures 3 to 6 mm (0.12 to 0.24 in) in diameter.

[14] American mycologist Alexander H. Smith cautioned that novice collectors will typically miss the sclerotium the first time they find the species.

The conidia are 8.5–12 by 4–5 μm, peanut-shaped, non-amyloid (not changing color when stained with Melzer's reagent), clamped, and produced by fragmentation of the coarse mycelium.

[4] In contrast to the three species of Collybia,[4] D. racemosa shows negligible reactivity to common chemical tests used in mushroom identification, including aniline, alpha-napthol, guaiacol, sulfoformol, phenol, and phenol-aniline.

[1] The cortex (outer tissue layer) of the sclerotium can be used as a diagnostic character to distinguish between D. racemosa and small white specimens of Collybia.

[18] The anamorphic or imperfect fungi are those that seem to lack a sexual stage in their life cycle, and typically reproduce by the process of mitosis in conidia.

The International Code of Botanical Nomenclature permits the recognition of two (or more) names for one and the same organism, one based on the teleomorph, the other(s) restricted to the anamorph.

Its fruit bodies grow on the well-decayed remains of agarics, often suspected to be Lactarius or Russula,[4][10] although the hosts' identities are often unclear due to an advanced state of decay.

This Russula has a long and persistent decay period, and, in the Pacific Northwest region of the United States where the study was conducted, provides a "nearly year-round substrate for mycosaprobic species".

[23] The fungus is widely distributed in temperate regions of the Northern Hemisphere,[24][25] but rarely collected "probably due to its small size, camouflage color, and tendency to be immersed in its substrate.