The round city of Baghdad is the original core of Baghdad, built by the Abbasid Caliph al-Mansur in AD 762–767 as the official residence of the Abbasid court. Its official name in Abbasid times was The City of Peace (Arabic: مدينة السلام Madīnat as-Salām). The famous library known as the House of Wisdom was located within its grounds.
On 30 July 762, the caliph Al-Mansur commissioned the construction of the round city, and it was built under the supervision of the Barmakids. Mansur believed that Baghdad was the perfect city to be the capital of the Islamic empire under the Abbasids. Mansur loved the site so much he is quoted saying, "This is indeed the city that I am to found, where I am to live, and where my descendants will reign afterward". The goal was to replace Harran as the seat of the caliphal government; however, a city of Baghdad is mentioned in pre-Islamic texts, including the Talmud, and the Abbasid city was likely built on the site of this earlier settlement.
Baghdad eclipsed Ctesiphon, the capital of the Sasanian Empire, which was located some 30 km (19 mi) to the southeast, which had been under Muslim control since 637, and which became quickly deserted after the foundation of Baghdad. The site of Babylon, which had been deserted since the 2nd century, lies some 90 km (56 mi) to the south.
The old Baghdad was a small village, and despite its name, which is of Iranian origin (bag "god" + dād "gifted"), the original inhabitants were probably Aramaic-speaking Nabateans. The new city, however, was mainly Arabic-speaking, with considerable Persian elements in the population and urban environment, although there have not been any major Persian settlement in the village of Baghdad or its surrounding communities, all of which were absorbed into the new city of Baghdad. The Persian elements rather appeared after the foundation of the new city, and included Persian architectural influence, Persian military settlement in the early years, the continuing settlement of Persian scholars, and the late rulers of Persian origin (such as the Buyids).
The city was designed as a circle about 1 km (0.62 mi) in diameter, leading it to be known as the "Round City". The original design shows a ring of residential and commercial structures along the inside of the city walls, but the final construction added another ring, inside the first. In the center of the city lay the mosque, as well as headquarters for guards. The purpose or use of the remaining space in the center is unknown. The circular design of the city was a direct reflection of the traditional Persian Sasanian urban design. The ancient Sasanian city of Gur/Firouzabad is nearly identical in its general circular design, radiating avenues, and the government buildings and temples at the center of the city. This points to the fact that it was based on Persian precedents. The two designers who were hired by al-Mansur to plan the city's design were Naubakht, a former Zoroastrian, and Mashallah ibn Athari, a Muslim astrologer/astronomer.
The city had four gates: Bab al-Kufa ("gate of Kufa"), Bab al-Sham ("gate of al-Sham or Damascus"), Bab al-Khorasan ("gate of Khorasan"), and Bab al-Basra ("gate of Basra"). Al-Khuld palace, the main palace of Baghdad built by al-Mansur, was located near the Bab al-Khorasan. This too is similar to the round cities of Darabgard and Gor, which had four gates. The Khorasan Gate marked the beginning of the Great Khurasan Road.
None of the structures of the city has survived, and information are based on literary sources. The caliphal palace and the main mosque were located inside the circle. Influenced by the apadana design of ancient Iranian architecture, the mosque was built with a hypostyle prayer-hall with wooden columns supporting its flat roof. The caliphal palace featured an iwan and a dome-chamber immediately behind it, resembling Sasanian palace design (such as that of Gor and Sarvestan). Building materials was mostly brick (sometimes strengthened by reeds), reflecting Mesopotamian architecture.
The residents were of the types, military people who were settled by the caliph, and a large number ordinary people who later settled in the city for economic opportunities. The second group were mostly Arabs and local Nabateans. The first group were mostly Persians from Khorasan and Transoxania, who were settled in the northwestern district known as Harbiyya (حربية). The Harbiyya included Marwrūdiyya division (مرورودية, for those from Marvrud), a suburb of the Furus ("Persians", or possibly people of Fars), a suburb of the Khwarezmians, and a mosque dedicated to the people of Bukhara. As the future caliph Al-Mahdi moved from al-Rayy to Baghdad in 768, a second wave of Persian military people settled there. There were also noble Iranian families Barmakids (from Balkh) and the Sulids (from Gurgan). The descendants of these Iranians took the title abnāʾ (أبناء), either short for abnāʾ al-dawla (أبناء الدولة, literally "sons of the state"), or possibly echoing the title of the abna' of Yemen, also of Persian origin. The Persians of Baghdad were gradually acculturated by the early 9th century.