Two kinds of Pleurotus oyster mushroom isolates were collected. The first isolate was the local type and the second isolate was the commercial type.Crude polysaccharide extract was isolated from Pleurotus oyster mushroom as a brown powder extract by using hot water extraction method.This crude extract was characterized by using molish test and phenol-sulphuric test. It was found that this extract mostly carbohydrate in nature.The crude polysaccharide extract was tested for its antibacterial activity against Staphylococcus aureus and Escherichia coli.Results indicated that crude polysaccharide extract of local isolate caused an inhibition zone of about 1.4 cm for Staphylococcus aureus and Escherichia coli was inhibited at about 0.9 cm, while the crude polysaccharide extract of industrial isolate caused an inhibition zone of about 1 cm for Staphylococcus aureus and Escherichia coli was inhibited at about 0.8 cm. In order to determine the antitumor activity of crude polysaccharide extract, biochemical prophage induction assay was done for the crude extract of local and commercial isolates.It was shown that the crude polysaccharide extract of local and commercial isolate capable of induced the λ-phage, that inserted in the bacterial chromosome of E. coli CI857 (lysogen), to jump from its place, so made the bacteria to reproduce the β-galactosidase enzyme. And the crude polysaccharide extract of local isolate gave an enzymatic activity more than that of commercial isolate, that is mean the crude polysaccharide extract of local isolate has an antitumor activity more than that of commercial isolate. So the crude polysaccharide extract of local Pleurotus oyster mushroom was used in transformation and cytotoxic assays to estimate its immunomodulatory effect and antitumor activity.Results of transformation assay indicated that the crude polysaccharide extract gave an immunomodulatory effect more than that of phytohaemagglutinine (PHA).Results of cytotoxic assay, revealed that the crude polysaccharide extract in concentrations (10, 5 and 2.5) mg / 50 μl has a great cytotoxic effect on myloma cell line (which represented the tumor cell line), and no cytotoxic effect on chick-embryo fibroblast cell culture (which represented the normal cell culture) in concentrations (10, 5, 2.5, 1.25, 0.625, 0.312 and 0.156) mg / 50 μl was detected.The crude polysaccharide extract of wild isolate (Pleurotus oyster) was purified using gel filtration method. The purification process was done to determine which fraction was affective as antitumor, but this step was not conducted.