Final Fantasy XII is set within the land of Ivalice during an age when "magic was commonplace" and "airships plied the skies, crowding out the heavens". At this time, magicite, a magic-rich mineral, is commonly used in magic spells and in powering airships—a popular form of transportation in Ivalice. Ivalice is divided into three continents:[30] Ordalia, Valendia, and Kerwon. Ordalia is located in the western part of Ivalice. The Rozarrian Empire makes its home in the vast inland plains of this continent as the eastern portion of it is largely desert or "jagd"—lawless lands so rich in Mist (the ethereal manifestation of magicite) that airships cannot fly over them. Valendia is the home of Imperial Archadia, where vast and lush plains dot the landscape. Central to the story is Dalmasca, a small kingdom between the two continents and Empires. Located in the middle of the Galtean Peninsula of Ordalia, Dalmasca is surrounded by an expanse of desert. The temperate climate of Dalmasca differs from the cold environs of Kerwon and the lush plains of Valendia and Ordalia. During this time, Ivalice is beset by the pending war between the forces of Rozarria and Archadia. Caught between the two powerful Empires, Dalmasca and a number of smaller nations have already been subjugated by Archadia two years before the game begins.

According to the game developers, design inspiration came from a mix of medieval Mediterranean countries as demonstrated by the architectural styles found throughout Ivalice along with many of the races populating the region. The art team visited Turkey, which influenced the game’s Mediterranean-style setting. The developers also used styles and deco from other sources including areas in India and New York City. Of note is the use of Sanskrit in the city of Bhujerba. Phrases such as "Svagatam" (welcome) and titles like "Parijanah" (Guide) are lifted directly from Sanskrit. Hideo Minaba, a developer and co-art director with Isamu Kamikokuryō, mentions that the team tried to bring out Arabic culture in the design of the game. War is a predominant theme of the game and the developers confirmed that the cutscene battles are influenced by Ancient Rome.[36] When asked to comment on the fan observation of Star Wars influence, Minaba assured that although he was a fan of the Star Wars series, it was not necessarily an influence to the game's designs