Aflatoxin B1 (AFB1), a secondary metabolite produced by fungi of the genus Aspergillus, has been found among various foods as well as in fish feed. However, the effects of AFB1 on fish development and its associated toxic mechanism are still unclear. In the present study, we confirmed the morphological alterations in zebrafish embryos and larvae after exposure to different AFB1 doses as well as the oxidative stress pathway that is involved. Furthermore, we evaluated the potentially protective effect of Hericium erinaceus extract, one of the most characterized fungal extracts, with a focus on the nervous system. Treating the embryos 6 h post fertilization (hpf) with AFB1 at 50 and 100 ng/mL significantly increased oxidative stress and induced malformations in six-day post-fertilization (dpf) zebrafish larvae. The evaluation of lethal and developmental endpoints such as hatching, edema, malformations, abnormal heart rate, and survival rate were evaluated after 96 h of exposure. Hericium inhibited the morphological alterations of the larvae as well as the increase in oxidative stress and lipid peroxidation. In conclusion: our study suggests that a natural extract such as Hericium may play a partial role in promoting antioxidant defense systems and may contrast lipid peroxidation in fish development by counteracting the AFB1 toxicity mechanism.