It was created by Royal Decree on 29 August 1563 by Philip II of Spain in the city of Guadalajara.

The 1563 decree established its structure and district: In the City of San Francisco of El Quito, in Peru, shall reside another Royal Audiencia and Chancellery of ours, with a president; four judges of civil cases [oidores], who will also be judges of criminal cases [alcaldes del crimen]; a crown attorney [fiscal]; a bailiff [alguacil mayor]; a lieutenant of the Gran Chancellor; and the other necessary ministers and officials; and which shall have for district the Province of Quito, and along the coast towards the Ciudad de los Reyes [Lima] to the Port of Paita, exclusive; and inland towards Piura, Cajamarca, Chachapoyas, Moyobamba and Motilones, exclusive, including towards the aforesaid part the towns of Jaén, Valladolid, Loja, Zamora, Cuenca, La Zarza and Guayaquil, with the rest of the towns, which are in their districts or will be founded [in them]; and towards the towns of La Canela and Quijos, it should include said towns and the rest that shall be discovered; and along the coast towards Panama, until the Port of Buenaventura, inclusive; and inland to Pasto, Popayán, Cali, Buga, Chapanchinca and Guarchicona; because the rest of the places of the Government (Gobernación) of Popayan are of the Audiencia of the New Kingdom of Granada, with which, and with the one of Tierrafirme [Panama], it shall share a border on the north; and with the one of Los Reyes in the south; having for its western border the South Sea [Pacific Ocean] and eastern the provinces still not yet pacified nor discovered.The Audiencia was effectively autonomous because the Viceroyal government (to which the Audiencia was technically subordinate in political matters) was too far away to administer its territories effectively.

In 1739, the Viceroyalty of Nueva Granada was re-established and the Audiencia of Quito was returned to it until it declared itself independent from Spain.

A year later the King of Spain passed the Real Cédula of 1740 where the borders of the Audiencia of Quito would be closer to 4° south of the Equator.

The departments of Ecuador, Guayaquil, and Azuay united to form the Distrito del Sur.