Fungal spores are increasingly used as reliable proxies in palaeoenvironmental reconstructions; however, little attention is paid to the ecological tolerances of the fungi themselves and the signal the fungi provide. This chapter provides a much-needed background in fungal biology and ecology of monophyletic Dikarya (Ascomycota and Basidiomycota), as well as taphonomic considerations which could be included in any use as palaeoecological indicators. It is intended to help those who are interested in using fungal spores as palaeoecological indicators to make more informed interpretations. A recapitulation of spore dispersal strategies and distances is presented for a better understanding of the transport mechanisms of fungal spores. Likewise, pigmentation is discussed, as it results in significant taphonomic bias in fossil fungal assemblages and, as some dark-coloured pigmentation is authigenic while some develops during taphonomy. A key element of this chapter is discussion of the environmental role of fungi, including modern v. palaeo-approaches to fungal ecology, fungal assemblages, and diversity patterns as diagnostic tools to infer palaeoenvironments.