A common and widely distributed species, it is found in Asia, Australia, Europe, and North America, where it grows in groups or dense overlapping clusters on the logs, stumps, and trunks of deciduous trees, especially beech, oak, and birch.

Bioluminescence is also observable with mycelia grown in laboratory culture, and the growth conditions for optimal light production have been studied in detail.

The luminescent glow of this and other fungi inspired the term foxfire, coined by early settlers in eastern and southern North America.

[14] More recently, phylogenetic analyses of the sequences of their ribosomal large subunit genes have concluded that Panellus stipticus is closely related to the poroid mushroom Dictyopanus pusillus.

[1] The molecular analysis supports a previous assessment by mycologists Harold Bursdall and Orson K. Miller, who in 1975 suggested merging Dictyopanus into Panellus based on similarities in spore shape, stem structure, and the ability of dried fruit bodies to revive when moistened.

[15] Formerly grouped in the family Tricholomataceae,[16] a wastebasket taxon of gilled mushrooms with white spores, P. stipticus is now classified in the Mycenaceae,[17][18] after a large-scale phylogenetic analysis revealed "a previously unsuspected relationship between Mycena and Panellus (including Dictyopanus)".

[24][25] Etymologically, it is a Greek equivalent to the Latin word astringens, deriving from στυπτικός (styptikós), itself from the verb στύφειν (styphein), "to contract".

Fresh fruit bodies range in color from yellowish-orange to buff to cinnamon; when dried they may be various shades of tan, brown or clay.

The cuticle of the cap (known as the pileipellis) is between 8–10 μm thick,[32] and is made of a loose textura intricata, a type of tissue in which the hyphae are irregularly interwoven with distinct spaces between them.

These cystidia located in the cap (pileocystidia) are cylindrical, thin-walled, yellow in Melzer's reagent, hyaline in KOH, sometimes with amorphous dingy brown material coating the walls.

Those from eastern North America have a mildly acrid taste that takes time to develop, and cause uncomfortable drying in the mouth.

In contrast, specimens from Japan, New Zealand, and Russia produce no sensation in the mouth, but cause significant constriction and a nauseating taste in the throat.

The horizontally aligned hyphae grow vertical branches which remain more or less parallel, ultimately forming the dorsal tissue of the cap.

[36] Panellus stipticus is common in northern temperate regions of Europe, and has also been collected in Australia,[37] New Zealand,[38] Anatolia,[39] Japan,[34] and China.

[31] In North America, it is more common in the east than the west;[13][23] the mushroom's northern range extends to Alaska, and it has been collected as far south as Costa Rica.

Fruit bodies are usually found in tightly overlapping clusters on the sides of hardwood trees, on logs, stumps, and fallen branches.

[49] Panellus stipticus uses a heterothallic, tetrapolar mating system:[43][50] each basidiospore develops into a self-sterile mycelium which, when grown alone, remains homokaryotic (i.e., with all cells genetically identical) indefinitely.

[34][51] Although the separated allopatric populations differ in bioluminescence and taste, the results revealed a universal intercompatibility group over these geographical regions.

In some areas, P. stypticus is bioluminescent, and the fruit bodies of these strains will glow in the dark when fresh or sometimes when revived in water after drying.

Job Bicknell Ellis, reporting on the phenomenon for the Journal of Mycology, wrote: By careful examination, the luminosity was found to proceed from the gills and not the stipe, nor from any fragment of rotten wood attached to the specimen.

[56]Canadian mycologist Buller in 1924 described the gills of P. stipticus in North America as luminescent, and noted that the fungus glows most strongly at the time of spore maturation.

[54] In general, the intensity of fungal bioluminescence decreases after exposure to certain contaminants; this sensitivity is being investigated as a means to develop bioluminescence-based biosensors to test the toxicity of polluted soils.

[59] Most known luminescent fungi are in the genus Mycena or closely allied genera; this grouping of fungi—known as the "mycenoid lineage"—includes P. stipticus and three other Panellus species.

Mycelial bioluminence may also function to attract animals that can potentially carry fungal spores in well-hydrated areas, as light emission from the mycelium is higher when it is hydrated.

Several studies have evaluated the biochemical basis of light production in Panellus stipticus, and concluded that there is no specific fungal luciferase.

[73][74] In the fungus, the level of activity of the enzyme superoxide dismutase (SOD) appears to play a critical role in the amount of light emission.

The major enzyme that initiates the cleavage of hydrocarbon rings is laccase, which catalyzes the addition of a hydroxyl group to phenolic compounds (polyphenols).

White-rot fungi are being investigated scientifically for their potential use in the bioremediation of land contaminated by organic pollutants, and to convert industrial wastes rich in toxic polyphenols.

Panellus stipticus has been shown to reduce the phenolic concentration of waste water produced by olive-processing plants—an environmental concern in many Mediterranean countries.

In this study, a liquid culture of P. stipticus mycelia reduced the initial concentration of phenolic compounds by 42% after a 31-day incubation period.