On January 2, 1492, the last Muslim sultan in Iberia, Emir Muhammad XII, known as Boabdil to the Spanish, surrendered complete control of Emirate of Granada, to Ferdinand II and Isabella I,Los Reyes Católicos ('The Catholic Monarchs'), after the last battle of the Granada War.

The 1492 surrender of the Islamic Emirate of Granada to los Reyes Catolicos is one of the more significant events in Granada's history and also the completion of the Reconquesta of Al Andalus. The terms of the surrender, the Alhambra Decree treaty, explicitly allowed the city's Muslim inhabitants to continue unmolested in their faith and customs, known as Mudéjar. By 1499, however, Cardinal Francisco Jiménez de Cisneros grew frustrated with the slow conversion efforts of Granada's first Archbishop, Fernando de Talavera, and undertook a program of forced Christian baptisms creating the Converso (convert) class for Moors (Morisco) and Jews (Marrano). Cisneros's new tactics, which were a direct violation of the terms of the treaty, provoked an armed Muslim revolt centered in the rural Alpujarras region southwest of the city. Responding to the rebellion in 1501, the Castilian Crown rescinded the Alhambra Decree treaty, and mandated that Granada's Muslims must convert or emigrate. With the 1492 Alhambra Decree Spain's Jewish population, unlike the Muslims, had already been forced to convert or be expelled-executed, becoming Marranos or Catholics of Jewish descent. Many of the elite Muslim class emigrated to North Africa. The majority of the Granada's Mudéjar Muslims stayed to convert, becoming Moriscos or Catholics of Moorish descent. Both populations of conversos were subject to persecution, execution, or exile, and each had a portion that practiced their original religion in secrecy.

Over the course of the sixteenth century, Granada took on an ever more Catholic and Castilian character, as immigrants came to the city from other parts of the Iberian Peninsula. The city's mosques, some of which had been established on the sites of former Christian churches centuries before, were converted back to Christian uses. New structures, such as cathedral and the Chancillería, or Royal Court of Appeals, transformed the urban landscape. After the 1492 Alhambra decree, resulting in the majority of Granada's Jewish population being expelled, the Jewish quarter (ghetto) was demolished to make way for new Catholic and Castilian institutions and uses.