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A legendary and very valuable medicinal fungus first known in China 2000 years ago is recognized in this study as a new species. The sanghuang mushroom (sanghuang) is a popular medicinal polypore used throughout China, Japan, and Korea. While its medicinal properties were recognized in an early Tang Dynasty herbal written in the 7th century, modern scientific research has only recently confirmed its highly effective antitumor properties. Although Japanese and Korean mycologists have adopted Phellinus linteus or P. baumii as the scientific name for sanghuang that belongs to the Inonotus baumii-I. linteus group in the Hymenochaetales (Basidiomycota), its species identity has not been satisfactorily answered. This study delimits the species of the I. baumii-I. linteus group including sanghuang, based on an analysis of morphological characteristics and nrDNA ITS sequences. Both morphological and molecular features were useful in separating different fungal species in this monophyletic group that are generally specialized with their host tree species. The true sanghuang is a new and previously undescribed species that grows solely on Morus in China, Japan, Korea, and Taiwan. It is now rare and endangered in the wild. Six related species of the I. baumii-I. linteus group distributed in Asia have evolved to specific host tree species: I. baumii on Syringa, I. lonicericola on Lonicera, I. lonicerinus comb. nov. on Lonicera, I. sanghuang on Morus, I. vaninii on Populus, and I. weigelae sp. nov. on Weigela; a key is provided to ease the determination of these taxa. [ABSTRACT FROM AUTHOR]