They were created by sibling gods of creation, Fuxi and Nuwa, as a test and bet to see whose views about humanity, another of their creations, were correct; Nuwa thought humanity was mostly good while Fuxi thought the opposite. Nuwa had created the mogwai species while Fuxi made their rules and the losing god of the bet would have to quit creating life forever. A city known as Fengdong was chosen to represent humanity and the ones who resided there were given the mogwai to care for. If these humans could preserve and respect the mogwai then Nuwa would win the bet and if not, then Fuxi would win. Unfortunately, humanity grew to love the mogwai too much and all wanted one, so they broke one of the rules to do so and the other two followed soon after. Chaos ensued as the mogwai became gremlins and people died. Before the rest of China could fall, Nuwa stopped the test and intervened, reverting the gremlins back into mogwai and hid them in the Valley of Jade which would be her very last creation since she had lost the bet.

The mogwai remained in the Valley of Jade in peaceful isolation from the world. However, in 1920, a mogwai named Gizmo was accidentally separated from the others while defending his home from an eagle. He ended up on an unnamed mountain range, where he was captured by a traveling show. While the circus owners were abusive to Gizmo, this did not yet cause a Gremlin outbreak as the circus owners perchance avoided violating the rules. One day in Shanghai, a boy named Sam Wing was shopping with his grandfather, who saw Gizmo put on display by the circus. The grandfather told Sam they needed to free Gizmo; later revealing they needed to travel to the Valley of Jade. During this time, Gizmo came into contact with water, spawning four mogwai that metamorphosed into gremlins. After a series of adventures, Wing would care for Gizmo for many years, eventually bringing the creature with him to America where they lived in an antique shop.

In 1984, Gizmo was given to a teenager named Billy after his father had gotten the mogwai from Sam Wing's grandson. The rules were obeyed until Billy's friend, Pete Fountaine accidentally knocked over a brush cleaning jar that contained water, causing Gizmo to multiply, quickly spawning five new mogwai. The new mogwai tricked Billy into feeding them after midnight and all except Gizmo became gremlins. After defeating the gremlins, Sam Wing came to retrieve Gizmo and the mogwai returned to him.

Years later, Sam Wing passed away from old age and Gizmo was forced to escape after the antique shop was demolished by the Clamp Center who had sought to buy the place. Gizmo was then captured by scientists from the Clamp Center, but was rescued by Billy who was an employee there. However, during his stay in the building, Gizmo was exposed to water which resulted in the creation of four new mogwai. These mogwai would soon eat after midnight and the gremlins were unleashed on the Clamp Center. After the gremlins were defeated, Gizmo returned to Billy who became his new owner