Mushroom growing substrate is generally derived from waste biomass or agricultural residues. Spent substrate is high energy content by-product from mushroom cultivation where it can potentially replace fuelwood for hot steam generation. However, direct burning of spent substrate is troublesome due to low efficiency and excessive smoke emission. Alternative energy conversion of the by-product should be used instead. In this work, recycling of spent substrates through gasification to provide heat for sterilization of substrate bags has been investigated. From the results obtained, spent substrate was successfully used as fuel in a gasifier. Satisfactory operation was obtained. Gasification of spent mushroom growing substrate could provide required thermal input, with clean fuel to the local mushroom farm. Thermal efficiency of about 20% was achieved, compared to less than 5% from existing furnace. Preliminary economic analysis showed that the farm can save around $300 a month, with simple payback period to positive cash flow of less than 12 months.