In real life, a shtetl is a small Jewish community in Eastern Europe. In The Devil's Arithmetic, the main character, Hannah, goes back in time, as Chaya, and meets her aunt and uncle, Gitl and Shmuel, who live in one of these shtetls. However, the author never chooses to name the specific shtetl they live in, because she wants it to represent the Jewish small town as a way of life. While, historically, each shtetl was unique and had its own distinct culture, the Jewish shtetl in general represents a small, safe community for Jews to live and practice freely, the kind of community which disappeared after the Holocaust and industrialization.
The setting of Gitl and Shmuel's shtetl also serves as a stark contrast to where both modern Hannah and her alter ego Chaya are from in the story. When Hannah is Chaya, she has come from Lublin, Poland, which is a big city compared to the shtetl. Her aunt and uncle are surprised by how she acts, and they think she knows too much for her age, blaming this on the fact that she came from a city. The real Hannah tries to explain to them that her odd, modern ways come from the fact that she is really from New Rochelle in America, which they quickly dismiss as nonsense. The setting of the shtetl in the novel symbolizes the Jewish traditional small towns which were destroyed after the Holocaust.