The city of Belz is located in western Ukraine. But I read that the song was originally about the Moldovan town of Bălți. The Yiddish pronunciation "Belts" for Bălți led to the song's later interpretation as being about the shtetl of Belz.
Be that as it may, I also came across this:
The song became with years more and more legendary and the town itself -- semi-mythical.
Anyway...what a beautiful melody!