The history of the city of Oyo is inextricably linked to the powerful Oyo Empire, of which it was the center. It is important to distinguish between two cities: Old Oyo (Oyo-Ile), the ancient capital, and New Oyo—the modern city discussed here. Present-day Oyo was founded in the 1830s as the successor to the fallen capital.
The foundation and establishment of the modern city, known as "New Oyo" or "Oyo Atiba," occurred around 1836–1837. Its emergence was a direct consequence of the fall of Oyo-Ile, the capital of the Oyo Empire, which was destroyed during the Fulani Jihad. Survivors led by the ruler (Alaafin) Atiba founded a new capital further south to maintain political and cultural continuity.
Several key factors in development allowed New Oyo to rapidly transform into a significant center. The city solidified its status as a political hub by becoming the residence of the Alaafin—the spiritual and secular leader of the Yoruba people. Its growth was also aided by its favorable geographical location in the savannah zone at the intersection of trade routes, which encouraged commerce and agriculture. Finally, Oyo took on the role of guardian of the traditions, arts, and social structures of the fallen empire, ensuring cultural continuity and uniting the Yoruba people.
The early cultural and economic features of the city were also shaped by its rich heritage. From its founding, Oyo's economy was based on agriculture, particularly the cultivation of tobacco, cotton, and teak. The city quickly became famous for its crafts: weaving, spinning, and dyeing fabrics, as well as leatherworking and calabash carving. Socially, Oyo maintained the complex structure inherited from the empire, where free commoners formed the basis of society and power was concentrated in the hands of the Alaafin and a council of nobles.