Microwave vacuum pyrolysis of palm kernel shell was examined to produce engineered biochar for application as additive in agriculture application. The pyrolysis approach, performed at 750 W of microwave power, produced higher yield of porous biochar (28 wt%) with high surface area (270 cm2/g) compared to the yield obtained by conventional approach (<23 wt%). Addition of the porous biochar in mushroom substrate showed increased moisture content (99%) compared to the substrate without biochar (96%). The mushroom substrate added with biochar (150 g) was optimal in shortening formation, growth, and full colonization of the mycelium within one month. Using 2.5% of the biochar in mushroom substrate desirably maintained the optimum pH level (6.8-7) during the mycelium colonization period, leading to high mycelium growth (up to 91%) and mushroom yield (up to 280 g). The engineered biochar shows great potential as moisture retention and neutralizing agent in mushroom cultivation.