The spent mushroom substrate (SMS) of Lentinula edodes that was derived from sawdust bag cultivation was used as materials for controlling Phytophthora blight disease of pepper. Water extract from SMS (WESMS) of L. edodes inhibited mycelial growth of Phytophthora capsici, suppressed Phytophthora blight disease of pepper seedlings by 65% and promoted growth of the plant over 30%. In high performance liquid chromatography (HPLC) analysis, oxalic acid was detected as the main organic acid compound in WESMS and inhibited the fungal mycelium at a minimum concentration of 200 mg/l. In quantitative real-time PCR, the transcriptional expression of CaBPR1 (PR protein 1), CaBGLU (β-1,3-glucanase), CaPR-4 (PR protein 4), and CaPR-10 (PR protein 10) were significantly enhanced on WESMS and DL-β-aminobutyric acid (BABA) treated pepper leaves. In addition, the salicylic acid content was also increased 4 to 6 folds in the WESMS and BABA treated pepper leaves compared to water treated leaf sample. These findings suggest that WESMS of L. edodes suppress Phytophthora blight disease of pepper through multiple effects including antifungal activity, plant growth promotion, and defense gene induction.