This square owes its existence to the great Lisbon earthquake of 1 November 1755 and the fire that followed. On this spot, abandoned due to natural disasters, a new, well-ordered city was built, as a result of reconstruction efforts coordinated by the Marquise of Pombal, the leader of the royal government.

Praça do Comércio was built on Terreiro de Paço, the site where the court of the Royal Palace had previously been held. This name is still used for the square, with its one side facing the Tejo, the greatest river on the Iberian Peninsula. Measuring 175 by 180 meters, this square is one of the largest on the European continent.