Amsterdam , the official capital of the Netherlands, lies on the banks of two bodies of water, the IJ bay and the Amstel river. Founded in the late 12th century as a small fishing village on the banks of the Amstel, it is now the largest city in the country and is a financial and cultural centre.

As of April 1, 2006, the population of the city proper is 743,905; the population of the greater Amsterdam area is approximately 1.5 million. Amsterdam has one of the largest historic city centres in Europe, dating largely from the 17th century. At this time, a series of concentric, semi-circular canals ("grachten") were dug around the old city centre. Along the canals houses and warehouses were built.

The canals still define Amsterdam's layout and appearance today. Many fine houses and mansions are situated along the canals. Some of the narrow brick houses are gradually sinking because they are built on wooden piles to cope with the marshy subsoil.

Although Amsterdam is officially designated as the capital of the Netherlands, it has never been (save a brief period between 1808 and 1810), the seat of the court, government, or parliament of the Netherlands, which are all located at The Hague.

Amsterdam is also not the capital of the province in which it is located, North Holland, whose capital is located at Haarlem.

Amsterdam is also famous for its red-light district, de Wallen. Prostitution is legal in the Netherlands at specific places. The red-light district is located in the center of the city along major canals and is clearly marked on maps. However, this is not unique to Amsterdam as other Dutch cities such as Utrecht, The Hague, Leeuwarden, Haarlem and Groningen also have "Hoerenbuurten" ("Hooker areas").