From the Super Mario Wiki
Lemons are found alongside Limes in Dry Dry Desert's oasis in Paper Mario. They restore one HP and two FP and can be cooked by Tayce T. to make a Tasty Tonic.
Lemons don't sell well anywhere and are largely only good for cooking. However, retrieving at least one is necessary for unlocking Dry Dry Ruins, as the way to earn the Pulse Stone (the only artifact capable of opening the Ruins) involves giving a Lemon to Sheek, who will then allow Mario to "meet" Moustafa (actually himself), owner of the Pulse Stone.
In Donkey Kong Jungle Beat, Lemons appeared at the end of every level in the Lemon Kingdom. After Donkey Kong reaches the end of that level, he munches through the whole lemon. This lemon is larger than Donkey Kong himself.
- Lemons were quickly mentioned in Lumpy's diary in Paper Mario: The Thousand-Year Door, where he stated that the last revision of his foodstuff during his Dry Dry Desert expedition consisted of Lemons and Limes.
- In Mario & Luigi: Partners in Time, Kylie Koopa repetitively mentioned Lemons as a way to metaphorically represent chagrin (in keeping with her paparazzo twang). These references to Lemons were likely not intended to refer to the Paper Mario Lemons, rather referring to the real life fruit Lemons are based on (a fact which is backed up by the fact that Kylie never capitalizes the word "Lemon" when she uses it).