Hoffmann explores two different settings throughout “The Nutcracker and the Mouse-King,” and the contrasts between them reflect his larger thematic arguments about imagination and reality. The first setting that he presents to the reader is the Stahlbaum house, a place rich in objects but lacking in spirit. Between the glittering Christmas tree and the tables of gifts in the parlor, Hoffmann’s descriptions of the house imply that Doctor and Mrs. Stahlbaum are well-off and can supply their children with numerous forms of entertainment. A bleak mood permeates this setting, however, because of the way the adults use it to restrict the children’s access to imagination-based play. In the first scene of the story, Maria and Fred are literally trapped in a dark room while their parents decorate the parlor. This image represents the restrictive nature of the Stahlbaum house, a quality which furniture pieces such as the glass case and locked wardrobe work to further illustrate. The fact that Hoffmann never offers the reader a glimpse outside the Stahlbaum house also hints at the limitations of viewing the world through a purely rational, realistic lens. 

Alternatively, Hoffmann creates a vibrant and whimsical landscape when the Nutcracker brings Maria to the Puppet Kingdom. Everything about this setting contrasts with the confining Stahlbaum house and serves as a celebration of the imagination. When Maria first lays eyes on the Puppet Kingdom, she is amazed by the bright colors, sparkling lights, and sweet smells of the Candy Meadow. All of these details contribute to the joyful and spirited mood of the Puppet Kingdom, contrasting significantly with the muted world of the Stahlbaum house. This liveliness characterizes every location that they visit on their journey, including the Christmas Wood, Gingerbreadville, Bonbon Town, and Confectionville. The ease with which Maria can travel and see so many different people during her time in the Puppet Kingdom speaks to the freedom that imagination can provide, and the fantastical details that Hoffmann imbues into the setting suggest that belief can make anything possible.