Sesame Street is the titular street where the central characters live on Sesame Street. Officially located in New York City, as is often confirmed by regional references and the adjacent New York subway, Sesame Street was designed to resemble an urban, inner city landscape, recognizable to children although slightly idealized. While many of the inserts took place in puppet-scale interiors, ranging from Ernie and Bert's apartment and Charlie's Restaurant to the countless walls or the varying game show sets of Guy Smiley, the main storyline scenes have always focused or at least begun on the street and its environs, outside of special location episodes. It serves as a meeting place for human and Muppet cast members alike.

The most central location is 123 Sesame Street, the apartment building whose front stoops are a frequent gathering place for the main characters, and the home to Susan, Gordon, and later, Miles; Maria, Luis, and later, Gabi; and in the basement apartment, Ernie and Bert. The next significant structure is the building which houses Hooper's Store and the Fix-It Shop (and later Mail It Shop and the local Laundromat) below, and apartments (including that of Bob and, in the early days, David) above. Between the two is a more open courtyard area, dubbed the Arbor, highlighted by an old carriage house/garage decorated with letters, later turned into a daycare centre, and more recently into Gina's veterinary office. The surrounding area includes the fire-escape/stairway area, another popular stoop, and items such as a tire swing for the neighbourhood and picnic benches, which are often used by patrons of Hooper's.

To the right of 123 are the somewhat more unusual abodes of Oscar the Grouch and Big Bird. Oscar's trash can is situated upon a pile of crates and often near other debris by the front steps, while a line of salvaged doors demarks the area for Big Bird's nest, consisting of a large literal bird's nest and many other accessories. From the 1970s through the late 1980s, the itinerant fruit cart of Mr. Macintosh and the rolling hotdog stand belonging to Willy frequently dotted the landscape. In later years, the neighbourhood expanded Around the Corner, with a host of new sets, which were eventually dropped. Through it all, the street lamppost has been a constant, the green fixture with its familiar "123 Sesame Street" sign often seen at the beginning or end of episodes, and which has essentially become the program's symbol, used on merchandise and, in variations, on most of the international versions of the show.

The actual studio sets used for Sesame Street have changed over the years, but for most of the recent seasons, the show has been taped at Kaufman Astoria Studios, utilizing stage G. In the feature films Follow That Bird and The Adventures of Elmo in Grouchland, the street was present, though more tangential, but in both cases the usual studio set was abandoned, and a more elaborate version reconstructed. Follow That Bird was filmed in Toronto, and the new street included an auto mechanics, bakery, and other buildings, while in Adventures of Elmo in Grouchland, a Laundromat was added, a deli, and an assortment of outdoor cafes and vendors, including a snowcone stand. The street has been around since at least 1951, the year Hooper's Store opened.

Directions to this neighbourhood have long been vague, though the question has been asked many times. One possible means is through the Subway Station. In Christmas Eve on Sesame Street, the gang can be seen getting off on the 86th St. subway stop, which does exist on the 4, 5 and 6 trains of the Lexington Ave Line. This would place the neighbourhood in the Upper East Side. Since Sesame Street is purportedly in New York, and according to the subway signs on the current set, the 1, 2, A, and B trains theoretically stop there (though in reality, there is no current station where all four lines connect).

An alternative route was suggested in a 1972 episode of The Electric Company. According to Fargo North, a traveler can go to Vi's Diner (itself vaguely located) and wait for the No. 4 bus, which then goes directly to Sesame Street. On Bob McGrath's 1991 album Bob's Favourite Street Songs, at the end of his cover of the show's theme song, a kid's voice urges him to "take the 1-2-3 bus".

In the 35th anniversary special The Street We Live On (also aired as Episode 4057), Elmo sends a package to Oscar addressed with the zip code 10128, an actual New York zip code located on the Upper East Side, consistent with the 86th St. subway stop. Stinky the Stinkweed later received a package in a season 44 episode, with the zip code 11106, used in Queens. On November 9, 2009, in honour of the 40th Anniversary, the city of New York named the corner of 64th and Broadway, 123 Sesame Street.

While singing the Sesame Street theme during the Elmopalooza, Telly say he thinks Sesame Street is "that way", pointing to his right, camera left, while on stage. Based on the orientation of the stage within Radio City Music Hall, this would imply that Sesame Street is north of West 50th Street at the Avenue of the Americas. Of course, this is all dependent on Telly's directional sense within the building. When there was a grease fire at Hooper's Store in 2001, the Engine Company 58/Ladder 26 extinguished it. They serve East Harlem, and the north end of Central Park.