The basidiocarps emerge appearing like tiny puff-ball fungi; the top splits and it takes on the shape of the nest. The nest is called the peridium, the 'eggs' are the peridioles, the dispersal units for the fungus's spores.

The peridium is designed to 'splash' the peridioles several feet when hit with water droplets. The peridioles have a tacky surface and adhere to whatever they hit. Once the peridioles dry, they split, releasing basidiospores to float on the wind.

If the basidiospores are lucky and alight on wood, they germinate sending out mycelia (fungal filaments). When appropriate filaments meet, they form the basidiocarps.

Bird's nest fungi are decomposers and do not injure plants or cause disease. The fungi are beneficial. They break down cellulose, recycling the nutrients back into the soil.