After you find your sword, the owl tells you to go to the Mysterious Forest. There, the owl says to look for a key.

Find the Toadstool

At the entrance of the Mysterious Forest (northwest of Mabe Village), the owl will tell you that there is a key hidden in this forest that you can use to open Tail Cave to the east.

Go east until you find a hollow log. Go into it.

Don't stand for a long time on the cracked floors around the edge. If you do, the floor will break and you will fall into the hole.

Go around and break the crystals with your sword. There is a rock in front of the treasure chest. Push it to the side after you have broken the crystals, then open the chest to get 50 rupees.

Go north, but be careful of the Zols that are hiding in the floor.

Go to the next room. Push the rightmost rock down, then push the one next to it down. Unfortunately you can't get the Piece of Heart yet, so just go south to leave the room.

Outside, you find a toadstool. Pick it up.

Get Magic Powder

There is a dead end to the north, so go back through the cave in the hollow log.

You still can't get the Piece of Heart, so just do the following to go through the rock puzzle:

After you push the rocks out of the way, make your way through the cave until you are outside again.

Go north until you reach an area with a hollow log that is blocked by rocks. Go east from there and you see a Piece of Heart that you can't reach. Go south from there and follow the path until you see a tree with a door in it. Go inside.

In the Game Boy version, press Start and equip the toadstool, then use it on the witch. In the Nintendo Switch version, walk up to the cauldron and talk to the witch and she will take the mushroom. She gives you Magic Powder. You can use it on the torch in this room to light a fire, but this doesn't give you any rewards, so feel free to skip it.

Use the Powder on the Raccoon

Now go back to the forest. Go west until you see the hollow log that is blocked with rocks, then go south until you see the hollow log that you went into before, and go west from there, then go north. Use the Magic Powder on the raccoon. The raccoon turns into Tarin.

Go north from this screen to find a treasure chest. Open it to get the Tail Key.

Trendy Game Figure

In the Nintendo Switch version, you can play Trendy Game now to get a CiaoCiao figure. You can also get a Piece of Heart there if you didn't already. If you get the CiaoCiao figure, go to the house with BowWow in front of it (the spherical monster with sharp teeth) and put the CiaoCiao figure on the stand on the table.

Get the Shovel

If you have 200 rupees, you can buy the shovel from the shop that is to the east of the weather vane in Mabe Village. You will need it later, so if you can't afford it now, be sure to go back and get it when you can.

Get a Secret Seashell

If you got the shovel, go into the doghouse at Madam MeowMeow's house and dig in the bottom-right corner to find a secret seashell.

Go to Tail Cave

In Mabe village, go to the kids playing catch. There is a sign to the south of them. Go east from the sign until you can't go any farther east, then go south to find Tail Cave.

To open the dungeon, use the key on the keyhole. (In the Game Boy version, push on the keyhole to use the key.) When you're ready, go into Tail Cave.