Mushroom Island is one of 11 accessible islands in the Great Sea in Paper Mario: The Origami King. It is charted in territory E-4 on the Sea Chart with a Mushroom icon. Notably, it is between Heart Island and Bonehead Island. While there are only three Toads to be rescued on the island, there are no Collectible Treasures to be found, Not-Bottomless Holes to repair, or ? Blocks to be struck.
A small, mushroom-shaped house sits at the center of Mushroom Island. Upon closer inspection, it is discovered the house is actually encased in a large chunk of ice. To the right of the house is a blue origami fish that Mario can hammer to reveal a Toad, who claims to have swam to the island to meet up with his friend, although he does not know where he is. To the left of the house is a tree that Mario can hammer to get confetti and spawn a Magic Circle for the Fire Vellumental. Using that Magic Circle, Olivia is able to melt the ice, allowing Mario to enter the house. However, due to its back door missing a doorknob, Mario is unable to open that door.
After getting the Mushroom Handle from a chest on Full Moon Island, Mario is able to insert it into the back door and enter the backyard, where he and Olivia find Luigi resting on a folding chair. He claims to have found the key to Peach's Castle, which turns out to be a Diamond Key. Olivia explains that it is the wrong key, which Luigi understands. He then decides to find whoever lives in the house and thank them for allowing him to rest on the island.
There is not much else in the backyard aside from a stone Toad statue and another blue origami fish, both to the left of the house. Mario can hammer the fish to reveal another Toad, who marks a spot on the Sea Chart where a treasure is to be found as thanks for rescuing him. There is a slab beneath the statue that reads "Seek ye a path to paradise". To the right of the house is a flight of stairs leading down to the basement, where Mario, Luigi, and Olivia find themselves in an origami crafting room, where they see a set for Origami Castle. Olivia reveals this room as the place where she was crafted by her brother. There is a book taped on top of a bookcase; Luigi allows Mario to use him as a spring to reach it. After Mario removes an Olly Tape from the book, which then falls to the floor, the brothers and Olivia read the book that reveals some secrets to the Fold of Life, the same technique used to craft Olivia and King Olly.
Suddenly, a Magic Circle spawns, allowing Mario to use the 1,000-Fold Arms to peel off some of the back wall and remove another Olly Tape to free a green Toad who is the Origami Craftsman. He explains how he used a special method to make Olly special, making him proud, strong and angry, leading him to trap the craftsman in the back wall. He reveals he had planned to use them as part of the Origami Castle, ultimately regretting his decision to use the Fold of Life. Olivia assures him they can stop Olly, inspiring Luigi to set out to find the true key. Mario and Olivia decide to travel to Diamond Island for their next clue.
Only the two blue Toads return to The Princess Peach; they are seen happily reunited and sharing a table with a crew member on the ship's bow.
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