The Shire lies in Eriador in J.R.R. Tolkien’s Middle-earth. Eriador is the broad region west of the Misty Mountains and east of the Blue Mountains.
The Shire occupies part of northwestern Eriador. It was settled by Hobbits in the Third Age, and its lands include Hobbiton, Michel Delving, and Tuckborough. Bree and the ruins of Arnor are also associated with the wider region, although they are not part of the Shire itself.
Eriador was once more politically organized under the northern kingdom of Arnor. After Arnor declined, many areas became sparsely populated, while the Shire developed a quiet, largely self-governing society. This geography explains why the hobbits’ journey takes them through places with both ordinary country life and ancient remnants of lost kingdoms.
Rhovanion is the broad region east of the Misty Mountains, Gondor is a southern kingdom, and Beleriand belongs mainly to the First Age. None of those is the correct regional setting for the Shire.