Where does the story, Cathedral, take place?
The entire story takes place inside of the apartment of the narrator and his wife. Although the story is called "Cathedral," that is the subject of the story and not the setting.
At the beginning of the story, the couple is waiting for a dinner guest, an old friend of the wife's. He is a blind man, and when he arrives they have dinner, and conversation, but afterwards the wife falls asleep and the husband and guest are left sitting in front of the t.v. while a documentary on cathedrals drones on. The husband begins trying to describe the cathedrals on tv to the blind man.
The blind man then asks the husband to draw a cathedral on a piece of paper so that he can hold his hand over the husband's while he draws and in that way better understand what a cathedral looks like. The better part of the story is about the two of them drawing a cathedral.
"The narrator sheds his inhibitions and sketches an elaborate cathedral with spires, buttresses, massive doorways, gargoyles, and a throng of worshippers. It is a unique and memorable experience that forms the story’s climax. The narrator not only shares his vision with the blind Robert, but he simultaneously shares Robert’s inner vision. At the same time, both share the spiritual vision of men who lived centuries earlier and collaborated to build the beautiful, mystery-laden Gothic cathedrals of Europe" (enotes summary).
Through the act of sketching, these two men spend the majority of their time, in a sense, in the cathedral (in their minds). So, the physical setting of the story is the apartment, and the mental setting is the cathedral!