From Diablo Wiki
Whimsyshire is the Diablo III Secret Level, a humorous area that's a direct homage to the Diablo II Secret Cow Level.
The information and images on this page are spoilers. If you want to see the secret level with your own eyes, beware.
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 Whimsyshire Overview
The secret level is a fully-playable area of the game. There are monsters (cute ones), gold and item drops, health orbs (which look like giant pink cupcakes), random and elite bosses, and even an amazing, baby's-blanket looking minimap.
Though the area is accessed through Act One, the difficulty is balanced to be equivalent to late Act Four. Thus a low level character will be slaughtered instantly, even in the normal difficulty version of Whimsyshire.
The secret level is not going to be a major portion of the gameplay; it's a fun treat and an amusement, but the developers didn't want to recreate the Diablo II Secret Cow Level, which was literally the most profitable area to play in during some early game patches.
 Items found in Whimsyshire
Presents - Often empty, seem to have less of a drop rate for items than chests. Pot o' Gold - A golden pot that, when clicked, drops gold and possibly other items. Smiling Couds - When clicked on, your character does an animation that appears to be a fist bump to the air above your head, and the clouds drop items and bounce with bigger smiles on their faces. They also giggle. Pinata - the Whimsyshire version of a Resplendent Chest. Random spawn chance.
Twinkleroot - Killer flowers on a rampage. Do not underestimate them. They cannot be knocked back and have no special animation on death. Cuddle Bear - Pink teddy bears, also out to kill you. They die in a much messier way than a Twinkleroot. Chubby Pink/Purple Unicorns - Unicorns, typically pink but also occurring in purple, that charge and attempt to trample you. They are the largest beings in Whimsyshire, and are also the messiest when they die.
All these... horrors can spawn in elite packs. There are a few special unique bosses that can spawn that are similar in function to most other random purple-named monsters in the game.
Whimsyshire used to be one of the best farming places, but was heavily nerfed and is no longer considered to be a very good farming spot. It can, however, drop Spectrum across all difficulties, only in this area, with a fixed level of 30.
 How to Enter
To gain access to Whimsyshire requires five special ingredients, and a Plan to teach the Blacksmith how to craft them into the Staff of Herding. This object must be taken to the Cow King's Ghost, a spectral bovine located on Old Tristram Road, near that pit with the mysterious red glow from within.
After the Cow King's Ghost conversation, the glow changes to a rainbow color and it becomes a clickable dungeon entrance. As was the case with the Diablo II Secret Cow Level, characters must have defeated that difficulty level to enter the secret level, which is balanced to be about as difficult as Act 4.
 Required Ingredients
Players must assemble the five ingredients and the Staff of Herding plan to enter the level.
- Black Mushroom ( )-- Found rarely in a room on Cathedral level one, in early Act One.
- Leoric's Shinbone ( )-- Found rarely in the fireplace in Leoric's Manor, in late Act One.
- (Leoric's Shinbone is *not* present or required in the Diablo 3 console.)
- To farm for this select Quest number 9 "The Imprisoned Angel" in the Change Quest menu when you log in. Take the Waypoint to Leoric's Manor. You will have two rooms to fight from the back of the manor to reach the room with the fireplace in.
- Wirt's Bell ( )-- An Act II vendor (Squirt) sells it for 100,000 gold on her Potions and Dyes tab.
- Liquid Rainbow ( )-- Spawns in the Mysterious Cave in the Mysterious Chest in the Oasis, Act 2. Save Zaven the Alchemist and he will open the entrance to the cave. The chest is located on level one.
- (Liquid Rainbow is *not* present or required in the Diablo 3 console.)
- Gibbering Gemstone ( )-- Random drop from Chiltara in the Caverns of Frost, Level 2, Act 3. It’s in the Fields of Slaughter. If you get Ice Caverns exit out try again. Chiltara is a Superunique with a low spawn chance.
- Plan: Staff of Herding ( )-- To teach the recipe to Haedrig. Drops randomly from Izual, Act 4.
Once the Staff is created, it can be upgraded to the Nightmarish Staff of Herding, Hellish Staff of Herding, or Infernal Staff of Herding via Gorell the Quartermaster, an NPC merchant found in the town section of Bastion's Keep.
 Upgrading the Staff
The Staff of Herding must be upgraded in order to access higher difficulty levels for Whimsyshire.
Once the original staff of herding is complete, the player needs only to buy upgrading patterns from Gorell the Quartermaster in Act IV. The plans always cost one gold each, but are increasingly expensive to upgrade.
The Nightmarish Staff of Herding version of the staff requires the normal staff and 100,000 gold. Once crafted, the player can then enter the Nightmare version of Whimsyshire. The same goes for the higher difficulties, although the crafting fee increases exponentially.
The patterns are only purchasable from Gorell in Act IV, and has a few requisites. The player must have the final Act IV quest active (#4), and the player must also know the previous difficulty's pattern. As an example, in order to purchase the pattern for the Hellish Staff of Herding, the player must already have taught Haedrig the pattern for the Nightmarish Staff of Herding. Each difficulty's pattern must be purchased within that difficulty. So to obtain the pattern for the Hellish Staff of Herding, the player must go to Hell Act IV to buy it. The final version of the staff is the Infernal Staff of Herding.
 Diablo 3 Console Differences
Whimsyshire works just the same for the Diablo 3 console, but the materials required to gain entrance are different. Leoric's Shinbone and the Liquid Rainbow are not found in the console version and are not required to create the Staff of Herding.
Blizzard has not given an explanation for this simplification.
Two videos showing off the level in action.
Video with cow king and whimsyshire play footage
This video shows the Cow King's ghostly conversation, then footage of the early battles in the level.
Various screenshots showing off portions of Whimsyshire.
Cuddle Bears are dangerous enemies.
Pink cupcakes are health orbs in Whimsyshire.
Leoric's Shinbone in Leoric's Manor. Used to craft the staff of herding.
Black Mushroom from the Cathedral (level 1).
 Whimsyshire's Music
The music played in the level is a famous piece of classical music for the piano, Ravel's Gaspard de la Nuit - Le Gibet. (Video of that composition here.) This was first revealed in the following video; the backwards playing begins around the 0:38 mark.