The fungi comprise a separate kingdom of life and epitomise the indeterminate growth form. Very little is known about the factors that influence the nature of fungal diversity and the link between individual behaviour and the structure and function of fungal communities is particularly poorly understood. Here, we present a theoretical framework that is capable of elucidating this link. An individual-based model for fungal community dynamics is introduced that has been developed from a physiologically based model for the fungal phenotype. The model is used to explore the role of individual interactions, the production of an external inhibitor field and the quality of the external environment on the structure and diversity of the resulting community. We show that traits relating to growth rate, autophagic behaviour and the production of inhibitors are key in influencing the success of a particular genotype in a community. The species richness increases with the amount of available resource. This is the first model of fungal community dynamics that introduces the concept of a biomass-based abundance distribution function that can be described by the log-normal form which typically corresponds to communities in equilibrium. The species abundance curve was stable to changes in the relative location of inocula, although the ranked abundance of the individuals was not. We present the first attempt to identify the traits that affect the form of that curve. Future studies should examine the role of environmental heterogeneity and spore dispersal.