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Colonia is oldest town in Uruguay, located some 180 km from the capital Montevideo. It was founded as Nova Colonia do Sacramento in 1680 by Admiral Manuel de Lobo, then governor of Rio de Janeiro - the only Portuguese settlement along the Río de la Plata. As such it was the focus of struggle between the Spanish, who founded the settlement at Montevideo in response, and the Portuguese over control of the area. It kept changing hands from Spanish and Portuguese crown until it finally remained with the Spanish. Nevertheless, for years it operated as a contraband port, evading the restrictions imposed on trade by the Spanish crown.
The Barrio Histórico (historic quarter) section of Colonia del Sacramento, situated on a small peninsula jutting out into the river, was named a World Heritaga Site by UNESCO in 1995.