The palace is the largest in Western Europe (the Louvre is a museum, but if we include it, the Royal Palace is the second), occupying an area of 135,000 m². It is richly decorated by artists such as Velázquez, Tiepolo, Mengs, Gasparini, Juan de Flandes, Caravaggio, and Goya. Several royal collections of great historical importance are kept at the palace, including the Royal Armoury and its weapons dating back to the 13th century, and the world's only complete Stradivarius string quintet, as well as collections of tapestry, porcelain, furniture, and other objets d'art of great historical importance.

Below the palace, to the west, is a garden called the Campo del Moro; to the east is the Plaza de Oriente and the Teatro Real operahouse. To the south is a vast square, the Plaza de la Armas, surrounded by narrow wings of the palace, and to the south of that is located the Catedral de la Almudena. To the north are the Jardines de Sabatini (Sabatini Gardens), named after one of the architects of the palace.