The story is set largely in catacombs underneath Montresor's home in Italy. The setting contributes significantly to the horror of the story. It is dark, cold, and damp in the catacombs. Because catacombs are burial vaults, Montresor and Fortunato pass by piles of bones, the remains of dead bodies.
The setting impacts the plot by the use of morbid imagery and tone as well as the demeanor of the characters. The mood of the story is one of impending doom and suspense. The setting impacts the mood with the dark imagery and morbid symbolism used throughout.