The city of Granada was founded by Francisco Hernandez de Cordoba next to the Indian village named Xalteva. The main role and importance of this city during the colonial times relied in the commerce activity of Spanish ships that sailed thru the Caribbean, Rio San Juan and end up anchoring in the lake port in front of the city.

Due to the economic importance and commerce activity, the city was a target for pirates and corsairs who assaulted the city several times. The first of many assaults took place under the command of pirates John Davis and Henry Morgan in 1665 when the buccaneers sailed thru the Rio San Juan and the Great Lake to take the city by surprise. There was a similar attack by the same route several years later and a third attack took place but this time thru land via the Pacific Ocean.

A fourth attack took place in the middle of the IXX century when filibuster William Walker took the city and later on with help from mercenaries and liberals control of the country proclaiming himself president. With the help of the neighbor Central American countries Walker was kicked out of Granada and Nicaragua. In the process Walker set the entire city of Granada in fire in 1857. He wrote on ruins left behind “here lies the city of Granada”.

For several years until beginnings of the XX century Granada and Leon disputed the right to be the capital city of Nicaragua, until Managua was named in the early XX century.