The Portrait of a Lady takes place primarily in England, Italy, and France, with a brief flashback to the United States. The book is set in the 1870s, just after the American Civil War ended and, due to the post-war economic prosperity, Americans started to become interested in transatlantic travel to Europe. Most of James’s characters are American expatriates who settle down in Europe. As a member of this community, he knew these social dynamics well.
In juxtaposing American and European cultures (via Americans navigating their way through Europe), James is making a point about American New World vs. European Old World values. James shows how the people who have spent the most time in the United States—such as Isabel and Goodwood—value their freedom and individualism while the Europeans (primarily Englanders)—such as Mrs. Touchett and Lord Warburton—care much more about elitism and conforming to social norms.
The Portrait of a Lady also takes place during a particular moment in art history. In the 1870s, the Aesthetic Movement was becoming popular, as more and more artists were giving up conservative artistic values—and even social or political intentions—in favor of “art for art’s sake.” Certain characters—particularly Osmond and Ralph—represent Aesthetic values in their pursuit of collecting the most beautiful art (regardless of whether or not the art has a deeper meaning).
It is also significant that James was publishing this book in the early 1880s right as Parliament was debating the Married Woman’s Property Act. This Act allowed women to buy, own, and sell their own property (separate from their fathers and husbands), and established them as separate entities from their husbands. This context renders Isabel’s sense of being trapped in her marriage with Osmond even more painful, as the book is set in a time when women were unable to reap the benefits of this new policy.