“The Fisherman and His Soul” is set in an unnamed coastal village, likely somewhere in Europe. As an adaptation of a fairy tale, the story’s setting is left vague, though there are subtle references to the story’s European location, such as a character dressing “in the Spanish fashion” and another character traveling “East” to “the country of the Tartars” (an ethnic group in Turkey and the surrounding areas).
While the story is, in many ways, a magical one untethered from reality—in this world there are mermaids, witches, and anthropomorphic souls—the Christian Church is still very much a presence. This is significant because Wilde did not have an easy relationship with the Church—as a queer man, he was actively harmed by the Church’s influence in state affairs that led to homophobic policies. (In fact, Wilde was imprisoned for homosexual behavior only a few years after this story was published.)
While the Priest in the story initially condemns the “ungodly” cross-species relationship between the Fisherman and the Mermaid (likely a symbol for queer relationships), he ultimately comes to embrace the couple, finding himself wanting to speak “not of the wrath of God, but of the God whose name is Love.” In this way, Wilde's story hints at the type of acceptance and compassion that he hoped the Church would embrace in real life.
