Mix one third of the onion with the meat, breadcrumbs, salt, pepper, and garlic in a large mixing bowl.
Form 2-inch meatballs.
Flatten the meatballs and cover each side with flour.
Brown both sides using about half of the butter.
Chop all of the mushrooms and mix with the second third of the onions.
Cook the mixture in butter until the onion begins to brown.
Put half of the mushroom mixture as the first layer in a large, heavy-bottomed pot.
Use the last of the onion as the second layer.
Put the meatballs on top of the onion, then cover the meatballs with the remaining mushroom mixture.
Pour 1 cup of water over the entire mixture and bring it to a boil.
After bringing it to a boil, immediately lower heat to a high simmer and cook for about 15 minutes or until meatballs are no longer pink in the center.