The Bacchae is set in the ancient city-state of Thebes. It's interesting that though most Greek tragedians lived in Athens, their plays are hardly ever set there. In fact, it wasn't allowed. Maybe it just hit to close to home. Even so, the tragedies did almost always examine issues that Athens was currently wrestling with. Perhaps Athenians preferred a little objective distance when thinking about their problems.
Athenians also seemed to dig objective distance in terms of time. Tragedies were almost always set back in the day, somewhere in Greece's distant, mythical past. Euripides and his fellow tragedians drew from their culture's rich tradition of heroes and gods to weave their tales. The myth of Dionysus's punishment of the blasphemous Pentheus would have been well known to the ancient Athenian audience.
It's interesting that for the entire play we are within the walls of the city of Thebes. One of the central themes is man vs. nature or the city vs. the wild. At first we just hear about the wilderness outside the city through messenger speeches. Eventually, though, nature encroaches. Lightning, fire, and earthquakes ravage the Pentheus's well-ordered town as Dionysus makes the city his own.