The edible mushroom Volvariella volvacea is an important crop in Southeast Asia and is predominantly harvested in the egg stage. One of the main factors that negatively affect its yield and value is the rapid transition from the egg to the elongation stage, which has a decreased commodity value and shelf life. To improve our understanding of the changes during stipe development and the transition from egg to elongation stage in particular, we analyzed gene transcription in stipe tissue of V. volvacea using 3′-tag based digital expression profiling. Stipe development turned out to be fairly complex with high numbers of expressed genes, and regulation of stage differences is mediated mainly by changes in expression levels of genes, rather than on/off modulation. Most explicit is the strong up-regulation of cell division from button to egg, and the very strong down-regulation hereof from egg to elongation, that continues in the maturation stage. Button and egg share cell division as means of growth, followed by a major developmental shift towards rapid stipe elongation based on cell extension as demonstrated by inactivation of cell division throughout elongation and maturation. Examination of regulatory genes up-regulated from egg to elongation identified three potential high upstream regulators for this switch. The new insights in stipe dynamics, together with a series of new target genes, will provide a sound base for further studies on the developmental mechanisms of mushroom stipes and the switch from egg to elongation in V. volvacea in particular.