Ancient Balkan region in which Twelfth Night is set (7)
I believe the answer is:
illyria
(Other definitions for illyria that I've seen before include "ancient European state" , "Country of "Twelfth Night"" , "Adriatic coastal area, scene of Twelfth Night" , "Ancient region of Adriatic coast, setting for Twelfth Night" , "Orsino's dukedom" .)