The visual style of The Cabinet of Dr. Caligari is dark, twisted and bizarre; radical and deliberate distortions in perspective, form, dimension and scale create a chaotic and unhinged appearance. The sets are dominated by sharp-pointed forms and oblique and curving lines, with narrow and spiraling streets, and structures and landscapes that lean and twist in unusual angles, giving the impression they could collapse or explode at any given moment. Film critic Roger Ebert described it as "a jagged landscape of sharp angles and tilted walls and windows, staircases climbing crazy diagonals, trees with spiky leaves, grass that looks like knives". The sets are characterized by strokes of bold, black paint. The landscape of Holstenwall is painted on canvas, as opposed to a constructed set, and shadows and streaks of light are painted directly onto the sets, further distorting the viewer's sense of perspective and three-dimensionality. Buildings are clustered and interconnected in a cubist-like architecture, surrounded by dark and twisted back-alleys. Lotte Eisner, author of The Haunted Screen, writes that objects in the film appear as if they are coming alive and "seem to vibrate with an extraordinary spirituality". Likewise, Expressionismus und Film writer Rudolf Kurtz wrote "the dynamic force of objects howls their desire to be created". The rooms have radically offset windows with distorted frames, doors that are not squared, and chairs that are too tall. Strange designs and figures are painted on the walls of corridors and rooms, and trees outside have twisted branches that sometimes resemble tentacles.
As German film professor Anton Kaes wrote, "The style of German Expressionism allowed the filmmakers to experiment with filmic technology and special effects and to explore the twisted realm of repressed desires, unconscious fears, and deranged fixations". The visual style of Caligari conveys a sense of anxiety and terror to the viewer, giving the impression of a nightmare or deranged sensibility, or a place transformed by evil, in a more effective way than realistic locations or conventional design concepts could. Siegfried Kracauer wrote that the settings "amounted to a perfect transformation of material objects into emotional ornaments". The majority of the film's story are memories recalled by an insane narrator, and as a result the distorted visual style takes on the quality of his mental breakdown, giving the viewer the impression they are inside the mind of a madman. As with German Expressionist paintings, the visual style of Caligari reflects an emotional reaction to world, and in the case of the film's characters represents an emotional response to the terror of society that Dr. Caligari and Cesare represent. Often in the film, set pieces are emblematic of the emotional state of the characters in the scene. For example, the courtyard of the insane asylum during the frame story is vastly out of proportion. The characters seem too big for the small building, and the courtyard floor features a bizarre pattern, all of which represent the patients' damaged frames of mind. Likewise, the scene with the criminal in a prison cell features a set with long vertical painted shadows resembling arrowheads, pointing down at the squatting prisoner in an oppressive effect that symbolizes his broken down state.
Stephen Brockmann argues the fact that Caligari was filmed entirely in a studio enhances the madness portrayed by the film's visuals because "there is no access to a natural world beyond the realm of the tortured human psyche". The sets occasionally features circular images that reflect the chaos of the film, presenting patterns of movement that seem to be going nowhere, such as the merry-go-round at the fair, moving at a titled angle that makes it appear at risk of collapsing. Other elements of the film convey the same visual motifs as the sets, including the costumes and make-up design for Dr. Caligari and Cesare, both of which are highly exaggerated and grotesque. Even the hair of the characters is an Expressionistic design element, especially Cesare's black, spiky, jagged locks. They are the only two characters in the film with Expressionistic make-up and costumes, making them appear as if they are the only ones who truly belong in this distorted world. Despite their apparent normalcy, however, Francis and the other characters never appear disturbed by the madness around them reflected in the sets; they instead react as if they are parts of a normal background.
A select few scenes disrupt the Expressionistic style of the film, such as in Jane's and Alan's home, which include normal backgrounds and bourgeois furniture that convey a sense of security and tranquility otherwise absent from the film. Eisner called this a "fatal" continuity error, but John D. Barlow disagrees, arguing it is a common characteristic for dream narratives to have some normal elements in them, and that the normalcy of Jane's house in particular could represent the feeling of comfort and refuge Francis feels in her presence. Mike Budd argues while the Expressionistic visual style is jarring and off-putting at first, the characters start to blend more harmoniously as the film progresses, and the setting becomes more relegated into the background.
Robinson suggested Caligari is not a true example of Expressionism at all, but simply a conventional story with some elements of the art form applied to it. He argues the story itself is not Expressionistic, and the film could have easily been produced in a traditional style, but that Expressionist-inspired visuals were applied to it as decoration. Similarly, Budd has called the film a conventional, classical narrative, resembling a detective story in Francis's search to expose Alan's killer, and said it is only the film's Expressionist settings that make the film transgressive. Hans Janowitz has entertained similar thoughts as well: "Was this particular style of painting only a garment in which to dress the drama? Was it only an accident? Would it not have been possible to change this garment, without injury to the deep effect of the drama? I do not know."