The Netherworld is an alternate dimension where the Demon Sorcerers were banished by the Immortals, leaving behind one portal per demon. Each of these portals can be located by getting the Pan'ku Box to display the location. Theoretically, the only way out of this dimension is through each demon's respective portal; however, if a demon has been reduced to a spirit, that demon can move between the realms with the help of a spell. Also, a banishing spell can send a demon to this place. These spells are cast onto whatever object is the symbol of the Immortal that originally banished the demon in question. After this spell is used, the portal is sealed permanently.

The background in this dimension is orange, and there is very little gravity, as shown by the floating rocks that the demons used as platforms to stand on. Jade was able to leap great distances from rock to rock as a result. Bai Tza also states this dimension has no moisture and humidity, calling it a "bone dry pit". By the end of the series, all the demons sorcerers including Drago were condemned here for eternity.

Using the power of all eight Elemental forms of Demon Chi, Drago was able to open a portal to the Demon Netherworld; by employing a reversal spell, Uncle and Tohru were able to cause it to draw the escaping demons and Drago into it, with Shendu being drawn in as well when Drago tricked him. Xiao Fung and Bai Tza once referred the Netherworld as an abyss and a pit, respectively.