This is the second level in the game as well as the first level to take place entirely underground (if counting the secret area in World 1-1 which is made up of a cave). Piranha Plants make their first appearance in the game here. It is also the first level to have a secret exit. World 1-2 is a cave level, similar to World 1-2 from Super Mario Bros. It has many blocks which Mario can break.
At the beginning of the level, Mario will fall down a hole into a cave. Three Brick Blocks which are on top of nine coins will then appear. Mario should then go down a short rocky stairway and up another. After this, he will find a few Question Blocks and brick blocks, covering coins. Immediately after this, Mario can Ground Pound through numerous blocks to go further underground, and find a large number of coins. In order to leave this area, Mario can either wall jump through the shaft he came through or jump up using a spring. The first Star Coin in the level is to the right of the spring. It can be reached by jumping on top of some blocks and going into the rock alcove. Just past this, the first Koopa Troopa in the level will appear. Also, by jumping on top of some brick blocks in this area, breaking some on top of the Koopa Troopa, and wall jumping off the wall, Mario can walk on top of the brick blocks on the top of the level. Although this way is one way to get past the wall of brick blocks in this area, the main way is simply breaking them. After that, there is a log that will tip back and forth based on where Mario is walking. Right after the Midway Point, pipes with Piranha Plants will appear and Mario will have to avoid them. After the Piranha Plants, there are two Warp Pipes which Mario can jump on to proceed, and several enemies. Then there is another log. Mario can use this log to get to the secret exit, which will allow him access to a red Mushroom House and World 1-Tower. The final star coin can only be found this way. If Mario chooses not to do this, then he will come across several brick blocks, a pit, and the warp pipe which lets him leave the cave. Mario will then go through the pipe and surface in an area similar to World 1-1. He will then slide down the flagpole and exit the level. The secret exit is the same, except the stairs to let Mario get to the flagpole are floating in the air, and the flagpole's flag is red instead of black.
- Star Coin 1: Near the beginning of the level, on a ledge that Mario needs to use Brick Blocks to get.
- Star Coin 2: Many blocks surround it. Mario must break the blocks to get it. (Does not work with small or Mini Mario)
- Star Coin 3: Next to the secret exit, in plain sight.
World 1-2 features the first secret exit of New Super Mario Bros.. This secret exit will lead you to a Power-up Mushroom House and World 1-Tower. Right before the green pipe that leads to the end of the level, us the seesaw log platform to reach the top of the level. Run right, and this will lead you to the third Star Coin and a secret Warp Pipe. Simply go through the secret Warp Pipe, then it'll lead you to the secret exit.