Commonly known as the decorated pholiota, it is distinguished by its fruit body which is covered with pointed brown, curved scales on the cap and stem, and by its white gills.

L. decorosa was first described by American mycologist Charles Horton Peck as Agaricus decorosus in 1873, and the species has been transferred to several genera in its history, including Tricholoma, Tricholomopsis, Armillaria, and Floccularia.

Lookalike species with similar colors and scaly fruit bodies include Pholiota squarrosoides, Phaeomarasmius erinaceellus, and Leucopholiota lignicola.

The species now known as Leucopholiota decorosa was first described by Charles Peck in 1873, based on a specimen he found in New York State; he placed it in Tricholoma, then considered a subgenus of Agaricus.

[7] The appearance of a specimen at a 1994 mushroom foray in North Carolina resulted in a collaboration between mycologists Tom Volk, Orson K. Miller, Jr. and Alan Bessette, who renamed the species Leucopholiota decorosa in a 1996 Mycologia publication.

[10] The genus name Leucopholiota means "white Pholiota" (from λευκός, leukós), referring to the gills and the spores; it was proposed in 1980 by Henri Romagnesi who originally described it as a subgenus of Armillaria.

[12] Phylogenetic analysis based on evidence from ITS and large subunit ribosomal RNA sequence data have not confirmed that Leucopholiota decorosa belongs in the family Tricholomataceae.

However, the analysis does show it to be phylogenetically related to Phaeolepiota aurea, a species of unclear status in the Agaricales, and it confirms that L. decorosa does not belong in the family Agaricaceae.

[6] The spores are hyaline (translucent), roughly elliptical in shape, have thin walls, and are amyloid, meaning they absorb iodine stain in Melzer's reagent.

[17] Some species in the genus Cystoderma also appear similar, but can be distinguished by microscopic features, like the presence of spherical (rather than club-shaped) cells in the cuticle of the cap, and also their habitat—Cystoderma usually grows on soil, rather than wood.

[9][10] Leucopholiota decorosa is a saprobic species, deriving nutrients from decaying organic matter, particularly the rotting branches and stumps of deciduous trees.