Dinohattan is the Super Mario Bros. film's equivalent to the Mushroom Kingdom, as well as Dinosaur Land. It differs drastically from both video game counterparts in history and appearance, though retains some of the fantasy qualities the games are known for.
According to director Rocky Morton, Dinohattan was directly inspired by Dinosaur Land.
The meteorite impact into Earth was so powerful it created a parallel dimension with its own Earth. While this impact in our dimension caused the extinction of the dinosaurs and provided the conditions necessary for the evolution of mankind, it conversely caused the extinction of mammals and gave rise to intelligent dinosaurs with their dimension.
Dinosaurs living at the meteorite impact site were exposed to its geomagnetic energy, gradually evolving into the Portal Guardian cult. The Guardians were devoted to worshiping the monolith and maintaining the gateway between worlds, secretly ruling through the Monarchy. They harnessed its energy into the grid that powers their great city.
However, their deteriorating dimension forced the planet's population into the capital city, straining resources and fracturing confidence in the Monarchy. The Portal Guardian cult lost influence and faith, further dividing the already desperate people. General Koopa, head of military command, proposed merging the dimensions to claim the long-coveted stability and resources of our side. The Portal Guardians refused, though Koopa was given oversight of the city's power grid for research into conservation efforts.
General Koopa used this position to secretly develop the de-evolution technology for a military coup that saw the slaughter of the entire Portal Guardian cult and the King turned into Fungus. Only Daisy's mother escaped, fleeing into our world with her unborn daughter and the meteorite pendant necessary for Koopa's planned merge. The General pursued her into our dimension, first witnessing New York City.
This fleeting vision obsessed Koopa with recreating the modern metropolis in his own dimension. However, he was unable to accomplish it and instead created a grotesque parody, which deepened his desire to rule Earth instead. While Koopa maintained that his desire to conquer the parallel Earth was meant to return his people to their former dominance, it is implied that he only sought Earth for himself.
Except for the city of Dinohattan, the entire planet is a harsh desert known as the Koopahari Desert. Very little resources can be found in this environment, which is compounded by heavy pollution.
Dinohattan itself has deteriorated even further due to crime and pollution resulting from President Koopa's neglect. A thick web of fungus has also spread across the city, which has disrupted any attempts at repair or expansion.
Dinohattan was originally ruled by the King (unrelated to the character Koopa) and his unnamed wife, a member of the Portal-Keeper society. However, Koopa, a military officer, staged a coup and de-evolved the King into the fungus that now chokes the city. His chief platform as leader is to merge their world with ours and conquering it by claiming possession of a fragment of the meteorite that had destroyed the dinosaurs.
With the king and queen gone, Koopa set up a false democracy with himself the "President". He maintained this position for twenty years through false elections and a secret police made-up of de-evolved Goombas that remove political dissenters from the public eye.
Repeated mention is made to "gold Koopa Coins" as well as "Koopons" throughout the film, suggesting some similarity to the form of currency seen in the games. The name features Koopa's name as well, which implies he renamed it upon taking over Dinohattan. What the currency was known as before is unknown.
The inhabitants of Dinohattan are humans and human-reptile hybrids that evolved from dinosaurs displaced millenia ago from our world. While most of the population is indistinguishable from mammalian-evolved humans, some do possess reptilian traits such as tails, slitted pupils, scales, and oviparity.
Typical dinosaurs also appear in the city, yet are treated as pets or wild animals. Koopa himself calls Yoshi a "throwback", suggesting a sense of racial superiority to their ancestors. Other animals, such as real-world lizards and snakes as well as fictional video game Spinys, are seen or mentioned as food sources to this world's humans. Several typical dinosaurs are also seen eating fungus, suggesting omnivorous or herbivorous behavior.