Melt 1 tablespoon butter in a 12-inch frying pan over high heat. Add 12 ounces sliced mushrooms and 3/4 cup chopped shallots or onion; cook, stirring often, until mushrooms are lightly browned, 9 to 12 minutes.
Reduce heat to medium and add 2 more tablespoons butter and 2 cups dried orzo pasta; stir often until pasta is light golden, about 2 minutes.
Add 3 cups chicken broth and 1/2 cup dry sherry. Bring to a boil over high heat, then reduce heat and simmer, stirring often, until pasta is tender to bite and most of the liquid is absorbed, 9 to 11 minutes. If mixture becomes too thick before pasta is done, add a little more broth.
Stir in 1/3 cup grated parmesan cheese and salt and pepper to taste. Spoon risotto into wide bowls and sprinkle with a little chopped parsley and more parmesan cheese to taste.