An on-line real time grading and sorting system for dried oak mushrooms was developed for on-site application. Quality grades of the mushrooms were determined according to an industrial specification. Three dimensional visual quality features were used for the grading. A progressive color computer vision system with white LED illumination was implemented to develop an algorithm to extract external quality patterns of the dried oak mushrooms. Cap (top) and gil (stem) surface images were acquired sequentially and side image was obtained using mirror. Algorithms for extracting size, roundness, pattern and color of the cap, thickness, color of the gil and amount of rolled edge of the dried mushroom were developed. Utilizing those quality factors normal and abnormal ones were classified and normal mushrooms were further classified into 30 different grades. The sorting device was developed using microprocessor controlled electro-pneumatic system with stainless buckets. Grading accuracy was around 97% and processing time was 0.4 s in average.