When the Spanish landed in 1531, Peru's territory was the nucleus of the highly developed Inca civilization. Centered at Cuzco, the Inca Empire extended over a vast region, stretching from northern Ecuador to central Chile.
Francisco Pizarro and his brothers were attracted by the news of a rich and fabulous kingdom. In 1532, they arrived in the country, which they called Peru. (The forms Biru, Pirú, and Berú are also seen in early records.) According to Raúl Porras Barrenechea, Peru is not a Quechuan nor Caribbean word, but Indo-Hispanic or hybrid.
In the years between 1524 and 1526 smallpox, introduced from Panama and preceding the Spanish conquerors swept through the Inca Empire. The death of the Incan ruler Huayna Capac as well as most of his family including his heir, caused the fall of the Incan political structure and contributed to the civil war between the brothers Atahualpa and Huáscar. Taking advantage of this, Pizarro carried out a coup d'état. On November 16, 1532, while the natives were in a celebration in Cajamarca, the Spanish in a surprise move captured the Inca Atahualpa during the Battle of Cajamarca, causing a great consternation among the natives and conditioning the future course of the fight. When Huascar was killed, the Spanish tried and convicted Atahualpa of the murder, executing him by strangulation.
For a period, Pizarro maintained the ostensible authority of the Inca, recognizing Tupac Huallpa as the Inca after Atahualpa's death. But the conqueror's abuses made this façade too obvious. Spanish domination consolidated itself as successive indigenous rebellions were bloodily repressed. By March 23, 1534, Pizarro and the Spanish had refounded the Inca city of Cuzco as a new Spanish colonial settlement.
Establishing a stable colonial government was delayed for some time by native revolts and bands of the Conquistadores (led by Pizarro and Diego de Almagro) fighting among themselves. A long civil war developed, from which the Pizarros emerged victorious at the Battle of Las Salinas. In 1541, Pizarro was assassinated by a faction led by Diego de Almagro (El Mozo), and the stability of the original colonial regime was shaken up in the ensuing civil war.

Despite this, the Spaniards did not neglect the colonizing process. Its most significant milestone was the foundation of Lima in January 1535, from which the political and administrative institutions were organized. The new rulers instituted an encomienda system, by which the Spanish extracted tribute from the local population, part of which was forwarded to Seville in return for converting the natives to Christianity. Title to the land itself remained with the king of Spain. As governor of Peru, Pizarro used the encomienda system to grant virtually unlimited authority over groups of native Peruvians to his soldier companions, thus forming the colonial land-tenure structure. The indigenous inhabitants of Peru were now expected to raise Old World cattle, poultry, and crops for their landlords. Resistance was punished severely, giving rise to the "Black Legend".
The necessity of consolidating Spanish royal authority over these territories, led to the creation of a Real Audiencia (Royal Audience). The following year, in 1542, the Viceroyalty of Peru (in Spanish, Virreinato del Perú) was established, with authority over most of Spanish-ruled South America. (Colombia, Ecuador, Panamá and Venezuela were split off as the Viceroyalty of New Granada (in Spanish, Virreinato de Nueva Granada) in 1717; and Argentina, Bolivia, Paraguay, and Uruguay were set up as the Viceroyalty of the Río de la Plata in 1776.)
In response to the internal strife plaguing the country after Pizarro's death, Spain finally sent Blasco Núñez Vela to be Peru's first viceroy in 1544. He was later killed by Pizarro's brother, Gonzalo Pizarro, but a new viceroy, Pedro de la Gasca, eventually managed to restore order. He captured and executed Gonzalo Pizarro.
A census taken by the last Quipucamayoc indicated that there were 12 million inhabitants of Inca Peru; 45 years later, under viceroy Toledo, the census figures amounted to only 1,100,000 Indians. Historian David N. Cook estimates that their population decreased from an estimated 9 million in the 1520s to around 600,000 in 1620 mainly because of infectious diseases. While the attrition was not an organized attempt at genocide, the results were similar. Scholars now believe that, among the various contributing factors, epidemic disease such as smallpox (unlike the Spanish, the Amerindians had no immunity to the disease) was the overwhelming cause of the population decline of the American natives. Inca cities were given Spanish Christian names and rebuilt as Spanish towns centered around a plaza with a church or cathedral facing an official residence. A few Inca cities like Cuzco retained native masonry for the foundations of their walls. Other Inca sites, like Huanuco Viejo, were abandoned for cities at lower altitudes more hospitable to the Spanish.

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