The action of the play goes down in France (Roussillon and Paris, to be exact), as well as Italy. We're not exactly sure when the play is set. Let's just say that events occur "once upon a time." After all, the French setting is very much a fairy tale world, where the poor, orphaned daughter of a famous doctor lives with a rich countess and her handsome son.
Italy, on the other hand, is another story. It's basically a training ground for young, bored Frenchmen to play war, blow off steam, and sew their wild oats. It's also the place where Helen and Diana pull off their racy bed trick. (Italy had a bit of a reputation for being a very sexy place in Shakespeare's day. And in our day, actually.) In general, Italy is a much grittier world than France, which is probably why Shakespeare sends everyone back to Roussillon for the happy ending that he whips up for Helen and Bertram.
Check out set designer Rae Smith talk about her famous design for the National Theater's 2009 stage production of the play.