Heat the olive oil in a large pot over medium heat. Add the onion and cook until it softens.
Stir in the garlic and mushrooms. Cook until the mushrooms release their liquid and start to brown.
Add the carrots, Hungarian paprika, and tomato paste. Stir for one minute to coat everything evenly.
Pour in the vegetable broth and add the lentils and bay leaf. Bring the mixture to a boil.
Reduce the heat to low, cover the pot, and simmer for 25 minutes until the lentils are tender.
Remove the bay leaf. Season with salt and black pepper. Stir in the parsley just before serving.