In the mystical Mushroom Village, inhabited by tiny mushroom creatures, the residents worship a legendary goddess named Shahmaran, who is believed to be the queen of snakes. The villagers believe that whoever meets Shahmaran in her cave hidden deep within the Fungus Forest will find eternal happiness and joy. A flashback takes us five years back to a fire camp where an old fungus with a long gray beard narrates the tale of Shahmaran to a group of young fungus kids, including the main character, Fungy, and his friend. Every year, during a special ceremony, the wisest village member, a witch, chooses three young fungus who are considered worthy enough to venture into the forest and seek out Shahmaran's cave to find happiness. However, those chosen ones never return, leading the villagers to believe they have indeed found happiness and have ventured into the world.