It might not seem like it at first, but the title of this poem is dead-on. This poem is set in "The Waste Land." But even a quick glance at the poem can tell us that this isn't literally true. The setting actually seems to fly all over the place, from a fancy chalet in the Swiss countryside to a pub in London, from the banks of the Thames River to some unnamed, desert-like place. But the setting of this poem is not just a physical place, but a mental and spiritual landscape that is dry, infertile, and generally awful.
Wrapping your head around this idea of a "physical place inside your head" is really important to understanding this poem. When you try to picture the setting of this poem, it's best to think about the "arid plain" (425) that Eliot describes in "What the Thunder Said," a rocky, sandy place where nothing will grow. The waste land is also a place filled with litter, and not just the sandwich papers and cigarette butts of lines 175-180, but the broken fragments of classic (mostly Greek, Italian, and Roman) culture. In this setting, you can picture the blind prophet Tiresias groping his way around the barren desert and picking up the fragments of classic culture, while he keeps being assaulted by gross "visions" like the catty woman chatting in the bar or the young man carbuncular having loveless sex with the typist.
So how do we make sense of all the other literal places this poem seems to be set in, as with the woman in the pub, or the young typist's apartment? Yes, these are also part of the poem's setting, and they tend to take place in London; but overall, they form part of a larger spiritual landscape, which Eliot sees as being all of Western civilization in the 20th century.
In terms of cultural setting, you can't deny that World War I is very, very present throughout this poem, even though Eliot's references to it are usually indirect. This might actually reflect the way that people suffering from shellshock often have trouble remembering a battle zone because their minds have blocked out the horror of what happened. The overall tone of despair in this poem, combined with the description of the waste land as a barren, dirty place, would have been recognized by most readers in Eliot's time as the battlefields of World War I, which completely destroyed just about everything in certain parts of Europe, burning massive meadows and forests and leaving behind only an endless landscape of mud, dirt, and corpses.
The destruction of World War I had an enormous influence not only on Eliot, but also all of modernism. After all, how could Western civilization continue to believe that it was progressing when all of its so-called progress led to the deaths of over ten million people? World War I left not only a physical, but spiritual vacuum throughout Europe, turning it into what Eliot's waste land.