Pedro de Valdivia, an ambitious, dogged conquistador sent from Peru to colonize the south, founded "Santiago de la Nueva Extremadura" for the Spanish crown on February 12, 1541, at the foot of Cerro Santa Lucía. A surveyor laid out the city's plan, dividing blocks into lots for soldiers and the main Plaza de Armas, which was to be surrounded by civic buildings, a church, and the residences of high-ranking officers. Six months later, the native Mapuche Indians sacked the settlement. The Spanish were not discouraged, and immediately rebuilt. But starvation, devastating earthquakes, seasonal flooding from the Mapocho River, shifting interest to the war for colonial settlement in southern Chile, and a relative disinterest in Santiago by the Spanish crown meant the city would not grow much beyond a frontier town until the late 18th century.

But grow it did. The Mapocho River was outfitted with a series of dikes to prevent flooding, and a well-established route was set up between the city and the port town Valparaíso, promoting trade. By the 19th century the city had already begun building grand civic edifices, such as the Palacio de la Real and the Congress building. Wealthy landowners and merchants followed suit by trying to outdo each other with magnificent palaces that mimicked European styles down to the imported tapestries and furniture (although few of these residences still exist). The government invested in the city's culture with the Municipal Theater, parks, boulevards, and other beautification projects, and by the late 19th century, Santiago was a city that demanded attention.

Around the 1930s, Santiago's well-heeled residents began moving away from downtown, first to Bellavista, then on to Providencia and Las Condes. As the population grew the city expanded, and now Santiago's tentacles reach up into the Andes and sprawl over the fertile valleys to the south.