O. Henry does not specify where or when "The Gift of the Magi" takes place. The reader may assume that "the city" he refers to is New York City and that the story occurs around the time he wrote it—in the early 1900s. Details from the story, such as the clothes the characters wear, the physical descriptions of the apartment and of the city, and the language in the story (both the slang used by the characters and the vocabulary of the narrator) help support this assumption. For instance, the Youngs' flat has an electric buzzer (even though it is broken), but Della must use the gas to heat her curling irons, showing that the story takes place before electricity was as widely used as it is today. Wigs are made with real human hair, and watches are commonly carried in a pocket rather than worn on the wrist.

When this story was first published, in 1906, the roles of American men and women were fairly clearly defined. Jim and Della show several signs of meeting conventional expectations: he works outside the home, while she shops and cooks and takes care of the household; he is emotionally secure, comforting her during her crying spells. Women did not yet have the right to vote, although the suffrage movement had begun.

In the United States, an economic crisis was building, made worse by the tremendous amount of federal aid needed to help the people of San Francisco, California, after the infamous 1906 earthquake, the worst ever to hit an American city. The quake was calculated to register 8.3 on the Richter scale, cracking water and gas mains and igniting a 3-day-long fire that burned two thirds of the city. Twenty-five hundred people died, 250,000 were left homeless, and over $400 million in property was destroyed.

O. Henry did not allude to the current events of his day in "The Gift of the Magi" or in many of his other stories. This may have been because his characters were mainly working-class people, too involved with getting along in their day-to-day lives to pay much attention to international or even national events that did not affect them directly and immediately.

Early 1900s: In most married couples, the husband works and the wife stays home. Only one-third of the workforce is women.

Today: Women represent 40 percent of the workforce, and two-income families are common.

Early 1900s: Fewer than half of the families in America--46 percent--own their own homes.

Today: Home ownership extends to 64 percent of all families.

Early 1900s: Average annual income is $700, with an average work week of 53 hours.

Today: Average annual income is $31,000, with an average work week of 40 hours.