From the Super Mario Wiki
Mertropolis is an underwater city protected by an oxygen-containing dome featured in the The Adventures of Super Mario Bros. 3 episode, The Ugly Mermaid. Though never stated outright, it is implied to be somewhere within Water Land. Bowser planned to take over the city using his Doomsub, renaming it "Kooptropolis", but his plans were foiled by the Mario Bros, who used a group of Jelectros against his submarine.
Although Mertropolis is oxygen-filled, the residents are fish with human legs. Since fish can't breathe oxygen, the people of Mertropolis wear water-filled fishbowls. (Strangely, the citizens panicked when Bowser flooded the place.) Notable residents of Mertropolis include its ruler King Mackerel and his daughter Holly Mackerel.
The town's name comes from a portmanteau of the words "merfolk" and "metropolis", a word for a big city.
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