The paper discusses the city of São Paulo, one of the largest cities in the world, situated at the head of a basin drained by the Tietê River. This important river played a major role in the exploration and colonization of a large portion of South America by Europeans in the XVI and XVII centuries. Some of the geological characteristics in this region are quite unique. The paper is an attempt to analyse the relationship between these characteristics and São Paulo´s tremendous growth in population, reviewing the urban development of the city and showing how the hydro-geological factors affected its growth. A historical overview, from its foundation to the present day, is then presented in terms of: environment, site selection, natural resources and social factors.