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With the growing world population, food demand has also increased, resulting in increased agricultural waste and livestock manure production. Wheat straw and cow dung are rich nutrient sources and, if not utilized properly, may lead to environmental pollution. Keeping in view the cultivation of Agaricus bisporus on straw/manure-based substrate, the current study aimed to optimize the conventional manure preparation technique to reduce nutrient losses and keep the quality of manure at its best. The treatments were considered as traditional and optimized schemes for mushroom substrate preparation. The results achieved herein indicated that the nutrient losses were low in the optimum scheme. For carbon (C), the loss was 43.55% at the substrate stage in the traditional scheme and reduced to 37.75% in the optimum scheme. In the case of nitrogen (N), the loss was 22.01% in the traditional scheme and was lower (18.49%) in the optimum scheme. The nutrient concentration in Agaricus bisporus was higher with the optimum scheme compared with the traditional scheme. It was 1.74% for C, 7.17% for N, 3.58% for phosphorus (P), and 4.92% for potassium (K). The optimum scheme also improved the Agaricus bisporus yield per unit area (84.55%) and the total yield (28.92%). The net income of the optimum scheme was 102.95% higher compared to the traditional scheme. The economic analysis also revealed that the benefit–cost ratio of the optimum scheme was high (48.86%) compared with the traditional scheme. This study concludes that the use of the optimum scheme can better utilize the wheat straw and cow manure waste for substrate preparation and reducing nutrient losses. In addition, the final mushroom residue can also be used as a leftover substrate for further utilization. [ABSTRACT FROM AUTHOR]