The setting of "The Ugly Duckling" begins in a peaceful, idyllic farmyard. The story opens in a duck family where a large swan egg hatches, revealing an unusually large and ugly duckling compared to the others. The setting includes the farmyard, surrounding fields and meadows, a tranquil pond, and the cozy barnyard where the ducklings sleep.
The story follows the ugly duckling as he journeys beyond the farmyard, exploring different environments such as a marshy swamp, a forest, and a frozen lake, before finally finding his true home among a flock of swans.