Shifty Shellshock's loved ones are honoring him in a big way ... with plans for his celebration of life underway, TMZ has learned how they're going to show their love.

Ilya Krokav -- a close childhood friend of Shifty -- tells TMZ ... they're holding the celebration sometime in the next month or so in Los Angeles for friends and family ... but it will also be open to fans.

They're still searching for a venue, and looking at places that will hold a few hundred people. We are told they have not yet finalized what the musical tribute is going to look like.

Krokav tells us artists who worked with Shifty -- whose real name was Seth Binzer -- during his lifetime will perform ... and, organizers have also coordinated with legendary graffiti artist friends of the Crazy Town singer to put up murals of Shifty around Los Angeles.

Of course, the celebration of life wouldn't be complete without Crazy Town's involvement ... and, we're told Bret "Epic" Mazur is heavily involved, and is respectfully weighing what he will do to honor him at the event.

As for the family ... we're told they've given the group their blessing to throw the ceremony -- and, while they don't have any names locked down, they assume some family members will attend.

The family will be having a separate, private service to honor Shifty.

As we reported, 49-year-old Shifty passed away last month at an L.A. residence.

The L.A. County medical examiner's investigation into his cause of death is still in progress, though the band's manager Howie Hubberman says he died of an accidental overdose.