Psilocybin-containing mushrooms, commonly known as magic mushrooms, have been used since ancient and recent times for depression and to improve quality of life. However, their anti-inflammatory properties are not known. The study aims at investing cytotoxicity; antioxidant; and, for the first time, anti-inflammatory effects of Psilocybe natalensis, a psilocybin-containing mushroom that grows in South Africa, on lipopolysaccharide-induced RAW 264.7 macrophages. Macrophage cells were stimulated with lipopolysaccharide and treated with different concentrations of Psilocybe natalensis mushroom extracted with boiling hot water, cold water and ethanol over 24 h. Quercetin and N-nitro-L-arginine methyl ester were used as positive controls. Effects of extracts on the lipopolysaccharide-induced nitric oxide, prostaglandin E2, and cytokine activities were investigated. Phytochemical analysis, and the antioxidant and cytotoxicity of extracts, were determined. Results showed that the three extracts inhibited the lipopolysaccharide-induced nitric oxide, prostaglandin E2, and interleukin 1β cytokine production significantly in a dose-dependent manner close to that of the positive controls. A study proposed that ethanol and water extracts of Psilocybe natalensis mushroom were safe at concentrations used, and have antioxidant and anti-inflammatory effects. Phytochemical analysis confirmed the presence of natural antioxidant and anti-inflammatory compounds in the mushroom extracts.