Wolf's Rain takes place in a post-apocalyptic time when much of the world has been ecologically devastated in a form of fimbulwinter and most people live in poverty. A legend is told in the "Book of the Moon" that wolves are mystical beings who came to the world from a place called Rakuen (Paradise), at the dawn of time. It is also said that, in the future, wolves will, with the help of a mysterious woman called the "Flower Maiden" (a being created from the essence of lunar flowers), find a way to return to paradise and in doing so, bring about the end of the world. This legend is difficult for most to believe, though, because wolves were thought to have been hunted to extinction nearly 200 years ago. Some wolves have survived though and they have been coexisting with humans right under their noses. The wolves have a way of presenting themselves as being human to other humans, thus they can blend into human society with relatively little notice. This ability is in no way shapeshifting; it is a mental trick: an illusion.

It is also important to note that in the legend, wolves were set upon the land by Mother Earth to help human beings, because humans were once lowly creatures that were prey for the demons and monsters that plagued the world at the dawn of time. Once the wolves and humans defeated the monsters, they created humanity (human society, not human beings) from a part of themselves, and taught them basically everything they know. The wolves then kept watch over the humans from afar, and didn't become involved in their affairs.