As an industrial organic solid waste, oil residue, with wide sources and low price, but could not find an effective way to use currently. In addition, with the development of mushroom industry and rising price of traditional raw-materials, it is very necessary to find the substitute raw material to reduce production cost of mushroom cultivation. This study attempts to produce the strains of Flammulina velutipes by taking use of oil residue to replace part of the traditional raw material, there are two groups in the experiment: the test group is adding 5%, 10%, 15%, 20%, 40% of the oil residue to replace the culture medium of cottonseed hull and wheat bran; the control group is the traditional culture medium, then comparatively observed the growth of the mycelium. The results showed that it can promote the growth of the mycelium and shorten the cycle of seed production to add the oil residue in the test. But the growth rate of mycelium will be hindered when the concentration exceeds a certain range.The optimal culture medium to add the oil residue is as follows: 15% of the oil residue, 64% cottonseed hull, 20% coarse wood chips, 0% wheat bran , 1% lime. Oil residue contains a lot of the nutritional components to benefit the growth of edible fungi, and without the heavy metal pollution, can replace the culture medium of cottonseed hull and wheat bran and other traditional materials, reduce cost of production the strains, a fair-sized economic efficiency can be received, the environment can be protected.