 Coprinellus micaceus is a saprotrophic species, deriving nutrients from dead and decomposing organic matter, and grows in and around stumps or logs of broad-leaved trees or attached to buried wood. It prefers feeding on bark, particularly the secondary phloem, rather than the wood. In the scheme of the succession of fungal species involved in the decomposition of wood, C. micaceus is a late stage colonizer, and prefers to feed on wood that has already decomposed sufficiently to have reached "a friable softened consistency". A 2010 study suggests that the fungus can also live as an endophyte, inhabiting the woody tissue of healthy trees without causing disease symptoms. The fungus is also associated with disturbed or developed ground, such as the sides of roads and paths, gardens, building sites and the edges of parking lots; it has also been noted for growing indoors on rotting wood in humid environments. In one instance it was discovered about 120 m (400 ft) underground in an abandoned coal mine, growing on wooden gangways and props used to support the roof.
