The colonization of São Paulo started in 1532 when, on January 21, Martim Afonso de Souza founded the settlement that would become Vila de São Vicente (São Vicente Village), one of the oldest villages in Brazil. Following through with the land exploitation and looking for new people to evangelize, with a view to accomplishing the mission that brought them to the New World, a group of Jesuits, among whom José de Anchieta and Manoel da Nóbrega, went up Serra do Mar and reached the Piratininga plateau, where they found, according to some letters sent to Portugal, a "very healthy and fresh land, with good waters". In safety terms, the topographical localization of São Paulo was perfect: it was at a high and flat hill that made it possible to defend against the attacks of wild native indians. The Jesuits opened, on January 25, 1554, a school, around which the first mud huts started being built, originating the settlement known as São Paulo de Piratininga. In 1560, it became a village.
At the beginning, São Paulo lived on the subsistence agriculture, with the native indians working as slaves in a frustrated attempt to grow sugar cane on a large scale basis. At that time, however, the explorers' real dream was to find gold and precious metals. Therefore, in the second half of the century, the expeditions to the country's interior region, known as bandeiras, started getting organized, capture indians and search for precious metals and stones in far away lands, thus initiating the exploitation of Minas Gerais. In 1681, São Paulo became the center of the Captaincy, stretching over an area that was much larger than that occupied today by the state.
In 1711, the village became a city. The successful exploitations of bandeiras led the Portuguese Crown to split the Captaincy so that it could have stricter control over Minas's region. Because of that, during the 18th century, São Paulo continued to be the headquarters, that is, the departure point from where bandeiras used to leave. Bandeiras were responsible for expanding the Brazilian territory to the southern and southwestern areas beyond the Tordesilhas line. The more bandeiras advanced, the more they exterminated the native indians who showed resistance to this advancement. All of this led to the poverty faced by the province of São Paulo during the colonial period, since it had no profitable activity such as the production of sugar cane in the Northeast region, which used the native indians as labor force, and also because all men left to exploit Brazil's borders.
During the first 300 years of colonization, the number of indians and mamelucos (blend of white people with indians) far surpassed that of Europeans. Up to the middle of the 18th century, the population used to speak a common language based on tupi-guarani (the language of the native indians). During the period when the Iberian Crowns joined, from 1580 to 1640, it is said that Spanish was the second language in São Paulo. After the Independence, in 1822, Africans represented approximately 25% of the population, and mulatos (blend of white and black people) reached more than 40%. The number of indians in colonized regions was insignificant, mainly in sugar cane crop areas, concentrated on the Northern coast and in Itu/Sorocaba. The great turnover of the state's economy would take place only in the end of the 18th century and beginning of the 19th century, at which time the coffee started to replace the sugar cane and became the most important crop in the whole country.