So although it doesn't legalize the mushrooms, I-301 would "prohibit the city from spending resources to impose criminal penalties" on those who have them.
Marijuana is now legal for recreational use in ten U.S. states, including its most-populous, California, while 30 of 50 states allow its use for medical purposes.
Decriminalise Denver said: "No-one should go to jail, lose their children, lose their job, and lose their citizen's rights for using a mushroom".
Denver has voted to decriminalise the use of magic mushrooms - the first USA city to do so.
Kevin Matthews, director of the Decriminalize Denver campaign, said psilocybin has helped him deal with depression for years.
But researchers warn that psilocybin should only be used under medical supervision and can have negative effects, including anxiety and paranoia.
The government states that Schedule I drugs have "no now accepted medical use and a high potential for abuse".
It took the pro-psilocybin organizers in Denver three tries to develop language approved by city officials for the ballot.
Activists in California failed to get a similar initiative on the ballot past year, and supporters in OR are hoping to put the matter to a vote statewide in 2020. However, some recent research has suggested that psilocybin may be effective in treating some forms of depression.
Denver Mayor Michael Hancock and District Attorney Beth McCann opposed the initiative, but there was no organized campaign against decriminalization. "We're still figuring out marijuana, and even though things are going well so far, we're still measuring the impacts on the people of Denver". "One arrest is too many".
The Denver Psilocybin Initiative raised about $45,000 in support of the campaign, advertising mostly on social media and posters around Denver, and it gathered more than 9,000 signatures to get Initiative 301 on the ballot.
For instance, a 2017 study published in the journal Nature showed that 47% of patients experiencing treatment-resistant depression showed positive responses at five weeks after receiving a psilocybin treatments.