This early pioneer, known as Tortotubus, displays a structure similar to one found in some modern fungi, which likely enabled it to store and transport nutrients through the process of decomposition.
Although it cannot be said to be the first organism to have lived on land, it is the oldest fossil of a terrestrial organism yet found, researchers said.
"But before there could be flowering plants or trees, or the animals that depend on them, the processes of rot and soil formation needed to be established," said Smith, who is now at Durham University in UK.
Researchers attempted to reconstruct the method of growth for two types of fossils that were first identified in 1980s.
The fossils represent mycelium - the root-like filaments that fungi use to extract nutrients from soil.
It is difficult to pinpoint exactly when life first migrated from the seas to the land, but it is generally agreed that the transition started early in the Palaeozoic era, between 500 and 450 million years ago, researchers said.
But before any complex forms of life could live on land, there needed to be nutrients there to support them.
Smith found that Tortotubus had a cord-like structure, similar to that of some modern fungi, in which the main filament sends out primary and secondary branches that stick back onto the main filament, eventually enveloping it.
This cord-like structure is often seen in land-based organisms, allowing them to spread out and colonise surfaces.
In modern fungi, the structure is associated with the decomposition of matter, allowing a fungus colony to move nutrients to where they are needed.
The study was published in the Botanical Journal of the Linnean Society.
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