The entire story takes place within the "Happy-life Home" of George and Lydia and their children Wendy and Peter. This story takes place in the future, and the Happy-life Home is an electronically-controlled house that fullfils every need of the people who live in it. Part of the house, the nursery, works by telepathy, creating an environment that the people in the room most desire. This area of the house becomes the focal point of action, but the whole of the story unfolds within the house in various rooms.
The setting of "The Veldt" is a futuristic house called a "Happylife Home"—the narrator describes it as "costing thirty thousand dollars installed, this house which clothed and fed and rocked them to sleep and played and sang and was good to them." Much of the story revolves around a particular room, however, called "the nursery," a kind of three-dimensional television that works by telepathy.
The story problematizes the idea of setting, however, by introducing the question of realism. Although the story literally takes place in the Happylife Home, the life the Hadley family lives there is more make-believe than real, since machines do everything for them. Lydia asks George to "turn the house off" so they can go back to taking care of themselves, that is, live life without the mediation of technology. The nursery, and Wendy and Peter's evocation of Africa in the nursery, becomes a kind of alternate, and hostile, setting, one in which technology ironically makes it possible to experience nature. The parents' desire for a "real" life is countered by the children's imagined reality of Africa, which, the end of the story hints, might be the more real of the two.