Shady Valley is an unincorporated community in Johnson County in the northeastern corner of the U.S. state of Tennessee. It is just outside Cherokee National Forest. Shady Valley is also the name of the valley in which the town is located, between Holston Mountain ""it is the twin city of Mountain City Tennessee, on the northwest, and the Iron Mountains to the southeast. At 2,785 feet, it is the second-highest community in Tennessee.