A plan last year to name a Madrid street after the 'Iron Lady' of British politics was opposed by local left-wing politicians but the city hall's ruling right-wing Popular Party (PP) instead pushed through the decision to dedicate a square to her memory.
Outgoing Madrid mayor Ana Botella unveiled the new plaza on Monday and hailed Thatcher's "commitment to freedom", according to Spanish daily Publico.
The square, in the conservative district of Salamanca, includes a Hard Rock Cafe and a five-star hotel. It has existed for decades but had never previously been named.
Margaret Thatcher, the first female British Prime Minister, died on April 8th last year at the age of 87. Many people mourned her passing but some opponents of 'Thatcherism' held street parties.
Botella described the divisive British politician as "one of the great personalities of the 20th Century" and said that Madrid wished to "recognize Margaret Thatcher by putting her name on this great city".
Botella was joined by Madrid PP president Esperanza Aguirre. The ceremony was the first time that the two had been seen in public together since Botella announced her decision to not stand as mayor in the next elections, a move widely attributed to political pressure from within her party.
Aguirre, who is said to view Thatcher as a role model, described the former PM as a "political rebel" while the UK's Ambassador to Spain, Simon Manley, said that Thatcher was "indisputably a great patriot and servant of her country."
Madrid has already planned to name a primary school after Thatcher which led critics to complain when it was announced last year.
Baroness Thatcher was the first British Prime Minister to make an official visit to Spain, in 1988.
During the 1982 Falklands War, Margaret Thatcher agonized over Gibraltar's vulnerability to attack from Spain, according to The Guardian in December 2012.
Nicknamed 'the milk snatcher' after putting an end to the distribution of free milk to schoolchildren during her time as Secretary of State, she was Prime Minister in Britain from 1979 until 1990 and became known as the "Iron Lady" for her uncompromising style.
She earned the adulation of the right and the enmity of the left for her actions during the British miner's strike, and for her political views espousing sweeping cuts and a smaller role for the state.
Because of Thatcher's personal friendship with Chilean dictator Augusto Pinochet, who was indicted by Spain for human rights violations, and limited contact with Madrid, some people took to Twitter to protest:
La Thatcher os habría bombardeado Madrid bien tranquila si le hubierais tocado Gibraltar.
— יוֹחָנָן בָּרוּךְ (@PixelRobot) September 15, 2014
Thatcher would have calmly bombed you (Madrid) if you'd touched Gibraltar
Margaret Thatcher, esa señora que llamaba terrorista a Mandela y demócrata a Pinochet, ya tiene plaza en Madrid gracias al PP.
— Toni Velasco (@avelasgar) September 15, 2014
Margaret Thatcher, that lady who called Mandela a terrorist and Pinochet a democrat, now has a square in Madrid, thanks to the PP
– ¿Por dónde queda la Plaza Margaret Thatcher? – Gire a la derecha.
— Javi Sánchez Glez (@javisanchezglez) September 15, 2014
How do you get to Plaza Margaret Thatcher? Turn right…
#Botella inaugurando la Plaza Margaret Thatcher en el Barrio de Salamanca. En esta ciudad ya sólo nos falta la Avenida del Doctor Mengele.
— Jorge García Castaño (@jorgegcastano) September 15, 2014
Botella unveiling Plaza Margaret Thather in the Salamanca neighbourhood. All we need now in this city is a Doctor Mengele Avenue.