- In the land of Ny'alotha there is only sleep...
- In the sleeping city of Ny'alotha walk only mad things.
- Ny'alotha is a city of old, terrible, unnumbered crimes...
- You will rest in Ny'alotha.
Based on the whispers' explicit descriptions of the city In the land of Ny'alotha there is only sleep... it is possible that Ny'alotha is located within the Emerald Nightmare, but may have originated from somewhere on the world of Azeroth.
Ny'alotha may have some association with a wood or forest, based on the mysterious whisper The silent, sleeping, staring houses in the backwoods always dream... It would be merciful to tear them down... This whisper itself is a reference to the H.P. Lovecraft short story The Picture in the House:
Only the silent, sleepy, staring houses in the backwoods can tell all that has lain hidden since the early days; and they are not communicative, being loath to shake off the drowsiness which helps them forget. Sometimes one feels that it would be merciful to tear down these houses, for they must often dream.
A few more whispers mention dark woods, including one that may indicate the presence of an old god: The giant rook watches from the dead trees. Nothing breathes beneath his shadow. This likely means Black Rook Hold, though could also mean Karazhan. Other speculation suggests the area west of Deathknell, where there is a sub zone named the "Whispering Forest." It has been said that back when the Highborne were traveling from Nordrassil, they briefly landed in Tirisfal, but had to depart when several of them were driven to insanity by an unknown force. They then went north to found Quel'Thalas. If there is any point to the Whispering Forest, it's related to that force. However, Blizzard have stated that there's "something incredibly unsettling there", but it's not an Old God.
Y'Shaarj also mentions the forest when wielding : When you'll walk among the black forest, you will see.
Beneath the sea
It may also be one of the sunken cities similar to Vashj'ir and under control of naga and Queen Azshara, hence the "city of old, terrible, unnumbered crimes...". Many things that rest under the ocean's surface are called "sleeping". This speculation is supported by the whisper At the bottom of the ocean even light must die.... It is possible that Ny'alotha is Old gods' name for Nazjatar.
Another puzzle box whisper states In the sunken city, he lays dreaming..., suggesting that if Ny'alotha is indeed sunken, a creature there lies dormant. It may even be an old god: The drowned god's heart is black ice...
The name Ny'alotha may be derived from Nyarlathotep of H.P. Lovecraft's Cthulhu Mythos. Notably, one of the quotes ("city of old, terrible, unnumbered crimes") is similar to a line from the short story Nyarlathotep. It may also be a reference to R'lyeh, the underwater city where Cthulhu slept, dreaming.