Habitat: Found in wood chips in landscaped areas and in natural settings under hardwoods such as alder and cottonwood.

Conservation Status: Not of concern

Psathyrella gracilis commonly forms fungal forests among wood chips in landscaped areas; in natural settings under hardwoods such as alder and cottonwood, the fruitings are usually much smaller. It is one of many species with very long stipes and conic caps (reminiscent of many panaeoluses) that rot woody debris. It lacks a veil and the caps typically are translucent-striate when young and then fade and become opaque as they dry. The gills often are reddish tinged and sometimes have a red line slightly above their edge. The critical microscopic characters are the ellipsoid spores, 10--13 x 5.5--7 µm, with a large apical pore, long-necked pleurocystidia, and slightly stubbier cheilocystidia. Because of P. gracilis’s variable characters, a large number of forms, varieties, and species have been described based mostly on rather minor differences. P. corrugis is a synonym of many of these and, in those cases, has priority. Regardless of what names they go by, all of these mushrooms are nearly fleshless and thus have little to recommend them as edibles.