The species has a number of distinctive microscopic features, including very long cystidia on the stem, visible as bristles.

Marasmius funalis was first described and named in a 2002 article in Mycoscience by Haruki Takahashi,[2] based on specimens collected in 2000.

[3] The specific name, funalis, is Latin for "rope-like", and is in reference to the shape and character of the stem.

The cap is fairly smooth, but can have small, parallel furrows towards the edge,[4] which are arranged radially.

While younger specimens sport reddish-brown caps, they are a paler brown in older mushrooms.

The spores are inamyloid, meaning that they do not stain when they come into contact with iodine from Melzer's reagent or Lugol's solution.

The tip is either pointed or rounded, and the cell walls are smooth and colourless, up to 2 μm thick.

They are dextrinoid, meaning they stain a reddish-brown when they come into contact with iodine from Melzer's reagent or Lugol's solution.

The flesh in the cap is made up of cylindrical hyphae from 4 to 7 μm wide with thin cell walls.

However, the former has a cap covered in hairs or bristles, and differs microscopically; for instance, the hyphae feature clamp connections.

[3] The Malagasy species Setulipes funaliformis was named after M. funalis due to the morphological similarities between the two.

The species can be differentiated by the fact that the basidiospores of S. funalformis are slightly larger and narrower, measuring from 7 to 10 by 3.5 to 4.5 μm, and the caulocystidia of M. funalis are significantly longer.

[11] Mushrooms grow in groups on dead plant matter, and have been recorded on Japanese cedar (Cryptomeria japonica) wood and leaf litter in woodland mostly made up of Chonowski's hornbeam (Carpinus tschonoskii) and bamboo-leaf oak (Quercus myrsinifolia).