Founded in 1421 by the Portuguese navigator João Gonçalves Zarco, the city was briefly under Spanish (1580–1640) and British (1801, 1807–14) control. It is now the headquarters of Madeiran industry, commerce, and communications and is the site of a relay station in the Atlantic submarine cable system. The older part of the city focuses on the Sé cathedral (1485–1514) and has steep, narrow cobblestone streets. The buildings are generally whitewashed and are surrounded by gardens of tropical flowers; they line the curving shore of the Port of Funchal and spread inland on the lower slopes of an amphitheatre of mountains that reach 4,000 feet (1,200 m) in elevation. Stone walls support sloping terraces on which there is year-round cultivation.

Tourism, based on the scenery and the mild year-round climate, is a major economic factor. Exports from Funchal include the famous Madeiran wines, wickerwork, embroidery, fruit, fish, and dairy products. Economically significant industries include sugar milling, cabinetmaking, and distilling. Since 1960 Funchal's harbour and cargo-handling facilities have been enlarged and modernized from time to time; it is now an important regional port of call and bunkering facility. The city also has an international airport. Pop. (2005 est.) 100,331.