Bungie described the setting of Destiny as a "mythic science-fiction" world.[8] The setting follows a prosperous period of exploration, peace, and technological advancement known as the Golden Age.[9] In a universe where humans have spread out and colonized planets in the Solar System, an event known as "the Collapse" saw the mysterious dissolution of these colonies, the end of the Golden Age, and mankind teetering on the brink of extinction. The only known survivors of the Collapse are those living on Earth, who were saved by "the Traveler," a white, spherical celestial body whose appearance centuries before had enabled humans to reach the stars.[10] The Traveler now hovers above the last safe city on Earth, and its presence allows the Guardiansthe defenders of the Citythe ability to wield an unknown power, only referred to as "The Light."

Upon mankind's first attempt to repopulate and reconstruct after the Collapse, it is discovered that hostile alien races have occupied mankind's former colonies and civilizations, and are now encroaching upon the City. Throughout the game, players have to combat aggressive aliens who have occupied the Solar System. There are four separate races in the game, each occupying different planets. The Fallen are an insectoid race of nomadic pirates who scavenge ruined settlements on Earth, the Moon, and Venus for resources. The Hive are a macabre race of ancient aliens who have created massive underground settlements beneath Earth and the Moon's surface. The Vex are semi-organic androids who are attempting to seize control of Venus and Mars by turning them into their machines, which they have already done to Mercury. Finally, the Cabal are a military-industrial empire of massive amphibians who have established massive fortifications on Mars. Every race utilizes different strategies and weapons in combat. The Fallen possess cloaking and short-range teleportation technologies to increase their mobility. The Hive use superior numbers to overwhelm their opponents in close quarters while more elite units attack from a distance. The Vex utilize hard-light shields and teleport units of infantry into the battlefield en-masse. The Cabal rely on heavy armor, ballistic shields, and jump packs to combat players. All of these races are hostile towards each other, as they can often be observed attacking one another in-game for territorial dominance. The player takes on the role of a Guardian, and is tasked with reviving the Traveler while investigating and destroying the alien threats before humanity is completely wiped out. Destiny centers on the journey of the Guardians, the last defenders of humanity, set to protect Earth's last city.