Famicom Mukashibanashi: Shin Onigashima is a Famicom Disk System text adventure game. The plot revolves around an elderly couple with no children who adopt an infant boy and girl. When the children turn six, a dragon appears in the country, and starts turning people into Oni who steal the souls of others. The Oni arrive at their home and steal the elderly couple's souls. The children decide to save their adoptive parents.

The game is controlled by selecting commands such as the "Change Character" command, which allows you to switch between controlling Donbe (the boy) and Hikari (the girl). The game progress is shown by changes in the in-game graphics. The Famicom Disk System version comes on two disks released on different dates. Disk 2 cannot be played without completing Disk 1, and is switched while the system is still powered on. All later releases are switch-free.

Once upon a time, there was an elderly couple living in Nagakushi village, a small village located far up in the mountains. The couple had no children, until one day, they were entrusted with the care of an infant boy and girl, as prophesied in a dream. The years went by, and when the two children were 8 years old, there was a terrible occurrence in the western capital. An evil dragon suddenly appeared in the city, turning humans into oni, ogres that suck away the souls of other humans. The oni advanced as far as Nagakushi village, stealing away the souls of the elderly couple. Fortunately the two children were left unharmed, and they set out on a quest to save their adopted parents, not realizing that this adventure would reveal the secret of their true origins...