On 30 July 762 the caliph Abu Ja'far Al-Mansur founded the city. Mansur believed that Baghdad was the perfect city to be the capital of the Islamic empire under the Abbasids. Mansur loved the site so much he is quoted saying, “This is indeed the city that I am to found, where I am to live, and where my descendants will reign afterward". The city's growth was helped by its location, which gave it control over strategic and trading routes (along the Tigris to the sea and east-west from the Middle East to the rest of Asia). Monthly trade fairs were also held in this area. Another reason why Baghdad provided an excellent location was due to the abundance of water and its dry climate. Water exists on both north and south ends of the city gates, allowing all households to have a plentiful supply, which was very uncommon during this time. Baghdad reached its greatest prosperity during the reign of the caliph Harun al-Rashid in the early 9th century.

Baghdad eclipsed Ctesiphon, the capital of the Persian Empire, which was located some 30 km (20 miles) to the southeast, which had been under Muslim control since 637, and which became quickly deserted after the foundation of Baghdad. The site of Babylon, which had been deserted since the 2nd century BC, lies some 90 km (55 miles) to the south.

The making of Baghdad

In its early years the city was known as a deliberate reminder of an expression in the Qu'ran, when it refers to Paradise . Four years before Baghdad's foundation, in 758, Mansur assembled engineers, surveyors, and art constructionists from around the world to come together and draw up plans for the city. Over 100,000 construction workers came to survey the plans; many were distributed salaries to start the building of the grand city. The framework of the city itself is two large semicircles about twelve miles (19 km) in diameter. July was chosen as the starting time because two astronomers, Naubaknt and Mashallah, believed that the city should be built under the sign of the lion, Leo . Leo is significant because he is the element of fire and symbolises productivity, proudness, and expansion. The bricks used to make the city were 18” on all four sides. Abu Hanifa was the counter of the bricks and he developed a canal, which brought water to the work site for the use of both human consumption and the manufacturing of the bricks. Also, throughout the city marble was used to make the buildings and marble steps led down to the river’s edge. Within the city there were many parks, gardens, villas, and beautiful promenades which gave the city an elegant and classy finish . The city was designed as a circle about 2 km in diameter, leading it to be known as the "Round City". The original design shows a ring of residential and commercial structures along the inside of the city walls, but the final construction added another ring, inside the first. In the centre of the city lay the mosque, as well as headquarters for guards. The purpose or use of the remaining space in the center is unknown. The circular design of the city was a direct reflection of the traditional Arab urban design. The ancient Sasanian city of Gur is nearly identical in its general circular design, radiating avenues, and the government buildings and temples at the centre of the city.