Located opposite the royal chapel, it was the site of the Muslim School of Koranic Law, founded by Yusuf I. After the city was captured, the building was turned into the Town Hall, where the Governors of the city would meet. A semi-circular arch provides access to the elegant mihrab niche, the only part of the Islamic building that remains today. Inside it has rich decoration in the style of the Alhambra.

The Baroque palace that was subsequently built is set around a patio with a gallery above arches on Tuscan columns. The staircase is covered by a semi-spherical dome, decorated in Churrigueresque style. The façade is Baroque, with stone doorway. The windows and balconies are in wood and wrought iron. The palace has a sloping roof with Moorish tiles, and there are eaves with wooden modillions by way of decoration. This is now home to various departments of Granada University.