While the prologue of the book Lost Horizon takes place in Tempelhof, Berlin, Germany and the Epilogue takes place in New Delhi, India, the majority of the book takes place in Afghanistan, and in the Valley of the Blue Moon in Tibet. The valley's more whimsical name is Shangri-La. Chung-Kiang, China is mentioned in the prologue; however, it is in a long flashback, setting up the story.
Specific Setting Locations:
Baskul, Persia: A majority of the main characters are marooned in Baskul during a Persian revolution during the first few paragraphs of the book. Because they are in danger, they board a plane to Peshawar, Pakistan; however, they do not arrive since they are hijacked.
Chung-Kiang, China: This is the location of the hospital mentioned in the prologue. It is Roman Catholic hospital where Conway has amnesia and is aging rapidly.
Shangri-La, Tibet: Because the valley is hidden and mystical, the exact location is described in vague terms. It is in the Valley of the Blue Moon somewhere toward the western end of the Kunlun Mountains.
Tempelhof, Berlin, Germany: The prologue of the story begins at the Tempelhof Airport. This is where Rutherford and Wyland are having dinner, watching the planes come in and out of the airport. It is here that the story is setup and the manuscript is revealed that will tell about the group that happened to find the magical valley.