This vast waterfront square also known as Terreiro do Paço or "the palace's square," is where the royal palace stood for over two centuries until 1755, when its was destroyed by the Great Earthquake. The royal family moved to another residence in the district of Belem, and the new arcaded buildings acted as the port of entry to the city.

In the center of the square is a statue of King Jose I showing him on horseback, wearing his emperor's mantle, and measuring 14 meters in height counting from the pedestal.