The Plaza Mayor of Madrid was built in the 1400's on the same location as the old Plaza del Arrabal (square outside the walls). It was used as a market in the Middle Ages. It is also called the Plaza de la Constitución.
In the 1560s, King Philip II and his architect, Juan de Herrera planned to change it into a proper square for the Courts. The first part to be finished was the Casa de la Panaderia (bakery) in 1590. Gómez de Mora gave it the rectangular form. The ground is still cobbled. It finally opened in 1620 under the rule of King Philip III.
The statue in the middle is King Philip III on horseback made by Juan de Bologna. The statue was moved from the Casa de Campo to the Plaza Mayor in 1848.
In the 1700's, it was used for the crowning of kings, bullfights, carnivals and even executions. People watched from the balconies around the square.
The Plaza has been damaged by three fires. Juan de Villanova had the plaza built again in 1853 and that is what is seen today. People can enter the plaza through nine different arches.
References
Other websites
Casa de la Panaderia. High resolution photo
360° view of Plaza Mayor, Madrid
Plaza Mayor, description and pictures
Plaza Mayor Information and photos. Plaza Mayor in English Visitor and student information, history, present day uses and photos.