American cigar develops a kind of fungus (6)
I believe the answer is:
agaric
'a kind of fungus' is the definition.
'american cigar develops' is the wordplay.
'american' becomes 'a' (common abbreviation - e.g. in organisation names).
'develops' is an anagram indicator.
'cigar' is an anagram of 'garic'.
'a'+'garic'='AGARIC'
(Other definitions for agaric that I've seen before include "Fungus of mushroom family" , "fungal growth" , "Fungus, eg, mushroom" , "Type of mushroom" .)