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The setting of the story takes place in the sitting room of a house at night. The narrator is a servant of some sort who takes care of the "old man" but is haunted by the man's evil eye. He plans to kill the man and thereby effectively rid himself of the eye. The bulk of the story tells of the deed, however, which takes place at the door to the old man's bedroom. The night is dark and still, and suspense is built because of the darkness. The night is quiet, again leading to more suspense and adding to the fear of the old man when he hears the lantern make a noise. Then, when the police arrive, the setting shifts to the very room in which the narrator has placed the old mans carved body under the floorboards. The setting is crucial here because the narrator begins to think that he can hear the heart of the old man beating beneath the floor as he tries to calmly serve tea to the officers.
This is the setting, however, for the narrators tale. It is also possible to imagine that the story is set in an interrogation room or jail cell as it is clear from the telling that the events have already passed and the murderer has confessed his deeds. Perhaps he is in an institution and is relating his tale to anyone who will listen. He needs the listener to validate his actions or to free him from the guilt he now carries for his deeds.
A final setting is the mind of the narrator. The landscape of his psyche is clouded with first justification for his action (killing the old man to get rid of the eye) and then a sense of the growing panic that fills him and leads to his confession.
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