The Castle of Otranto is set for the most part in the enormous and hoary old dwelling from which the novel gets its name. Although it is extremely grand and imposing, the castle is neither welcoming nor comfortable. The castle is colossal, echoing, and filled far more with darkness than anything else. It has secret passages, silent and terrifying dungeons and towers for keeping people prisoner. It also connects directly to a church via one of these passages. This connection literally links the cold and tomb-like interior of the house to the austere and stony churches and cathedrals of Western Europe, their religious imagery, and their associations with death and burial.
The castle itself is filled with dingy rooms, slamming doors, and a sense of foreboding. Characters often hide from each other, eavesdrop, and plot in its many concealed corners. Ghosts emerge from paintings and walk the corridors, and the natural world outside rocks and quakes the stones and bricks of Otranto when the weather is bad. The setting dictates a lot of the plot in this novel, as the castle also represents the bloodline the antagonist Manfred so desperately wishes to safeguard. Even though the castle is not particularly pleasant as a dwelling, Manfred is willing to risk his soul to continue his association with it.
Some of the action also takes place in the Church of St. Michael and the area immediately around it. The Church is both a sanctuary and a site of betrayal, where interactions take on heightened symbolic and metaphorical intensity. Religion is very important to the characters in The Castle of Otranto, and the church symbolically and literally plays a big part in their lives. Moreover, the proximity of the church to the castle brings exemplary characters like Father Jerome into direct contact with evil ones like Manfred. The church acts as a foil to the castle, making it seem even more unpleasant than it otherwise might.
More broadly, the novel is set in medieval Italy and contains a fantastical depiction of life in the 16th century. Walpole attempts to make this ancient setting feel realistic and contemporary, however, by populating it with detailed descriptions and "realistic" interactions between characters. Walpole's choice to set his book in the 1500s makes the elements of the medieval romance genre in The Castle of Otranto flow smoothly into the narrative. Additionally, it makes the book's events seem long ago and inaccessible enough to justify the novel's supernatural aspects.
