Mushrooms are the most conspicuous fungal structures. Transcription factors (TFs) Bri1 and Hom1 of the model fungus Schizophyllum commune are involved in late stages of mushroom development, while Wc-2, Hom2, and Fst4 function early in development. Here, it is shown that Bri1 and Hom1 also stimulate vegetative growth, while biomass formation is repressed by Wc-2, Hom2, and Fst4. The Δbri1Δbri1 and the Δhom1Δhom1 strains formed up to 0.6 fold less biomass when compared to wild-type, while Δwc-2Δwc-2, Δhom2Δhom2, and Δfst4Δfst4 strains formed up to 2.8 fold more biomass. Inactivation of TF gene tea1, which was downregulated in the Δwc-2Δwc-2, Δhom2Δhom2, and Δfst4Δfst4 strains, resulted in a strain that was severely affected in mushroom development and that produced 1.3 fold more biomass than the wild-type. In contrast, introducing a constitutive active version of hom2 that had 4 predicted phosphorylation motifs eliminated resulted in radial growth inhibition and prompt fructification in both Δhom2 and wild-type strains, even in sterile monokaryons. Together, it is concluded that TFs involved in mushroom formation also modulate vegetative growth. Among these TFs is the homeodomain protein Hom2, being the first time that this class of regulatory proteins is implicated in repression of vegetative growth in a eukaryote.