The setup for the classic chip shot is the most unique of all stances in the game of golf.
With your feet apart a maximum of one foot and the ball lined up level with the inside of the back foot. Place the hands in a position so that the club face is square to the target and the hands are lined up even with the inside of the front thigh. From this position place just a little extra weight on your front foot and bend the knees slightly more than you would during a normal (full swing) setup.
When chipping the ball and trying to get it close to the hole (ideally to sink your first putt), it's good practice to choke down on the club anywhere from half an inch to 3 or 4 inches. This allows the golfer to get closer to the ball and to be more aggressive with the shot. The closer your hands are to the club head, the more control over it you'll have.