Though there is no specific rule regarding when the setting of a story is established, the description typically takes place at the beginning or soon thereafter. Setting helps to set the mood, so a writer needs to reveal it early.
Many writers consider setting one of the most important elements in a piece because it helps the reader relate to the story, according to About.com. Without knowing when and where the story is taking place and in what context the events are happening, the reader can get lost. American writer Eudora Welty once remarked, "Every story would be another story, and unrecognizable if it took up its characters and plot and happened somewhere else." Similarly, if the reader does not soon know the setting of the story, he is not necessarily experiencing the story the author intended.