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Life Mushrooms (referred to as Life Shrooms in the Paper Mario series) are Mushrooms from the Mario series. In the Paper Mario series, they would revive the character after dying (essentially making them like a 1-UP Mushroom). In Super Mario Galaxy, however, the Life Mushrooms had a new function: they would increase the character's maximum life. Some people also call them the Star Mushroom.
In both Super Mario Galaxys, a Lumalee appears holding an 1-UP Mushroom and a Life Mushroom to you buy with 30 Star Bits.