This vast, semi-circular space was conceived during the brief reign of Joseph Bonaparte as king of Spain. The development was the most important of the many urban changes he instigated, but the squar4e was not completed until the second half of the 19th century. The lead mansard roofs and stuccoed facades reflect the French influence at that time. Plaza de Oriente was intended to be a grand plaza for ceremonial events.

The stone statues around the landscaped gardens were originally intended for the parapet of the Palacio Real. They represent Roman emperors, Visigoth kings, and Christian monarchs.  The square underwent large-scale restoration at the end of 20th century. Most of the traffic was routed into tunnels, allowing the square to become pedestrian-friendly and a much more pleasant area for people to rest.