The Valley of Lies (偽りの谷, Itsuwari no Tani) is what Ameyuki calls the area surrounding Shangri-la, because so little of what happens there is as it appears. The valley lies deep within a mountain range. The river that runs through the valley produces a pleasant aroma whenever the water levels rise, which the residents of Shangri-la use as a medium for genjutsu: the genjutsu makes Shangri-la invisible to visitors to the valley and otherwise leaves people with positive, cheery feelings.
When Ameyuki destroys Shangri-la, a large quantity of mud is deposited in the valley. Shortly afterwards, Konan inadvertently spreads the seeds of a rare white flower within the valley, which end up thriving there. The mud eventually attracts Kanyū to the valley for use in her Hanasaki ceramics and the white flowers attract Kiiro for his bees to produce medicinal honey.