With the expulsion of the Jews from Spain and Portugal, thousands of Jews were dispersed throughout the world, and some decided to take the opportunity to move to the Land of Israel.  In the middle ages, there were few communities in Israel which were habitable and hospitable to Jewish settlement, but Tzfas was one of them, and many Jews headed toward Tzfas, both immediately after the expulsion and in the years that followed. 

Among them were some of the greatest rabbinical and kabalistic scholars of the time.  Kabbalah scholars were drawn to Tzfas because of its proximity to Mt. Meron, the burial place of Rabbi Shimon Bar Yochai.  R' Bar Yochai is believed to have learned the secrets of Kabbalah while hiding near Tzfas (in Peki'in) from the Romans.  It is said that God appeared to R' Bar Yochai through divine inspiration, imparting the secrets of the Kabbalah.  When the Roman decree against him was lifted, R' Bar Yochai left his hiding place and began to travel through the area, teaching what he had received (To Receive is the Hebrew word "L'Kabel", which is the root of the word "Kabbalah".) Rabbi Shimon Bar Yochai is also believed by religious Jews to have been the author of the Book of Zohar, the basis of Kabbalah. 

It was during the 15th and 16th centuries that Tzfas became recognized as one of the four holy cities of Israel, the "City of Kabbalah".  (The others being Jerusalem as the home of the Temple, Tiberias as the city where the Mishna was compiled, and Hebron as the home of the Cave of Machpelah, resting place of the matriarchs and patriarchs).

After the Spanish Expulsion, as Jews became more and more dispersed, the Jewish religious leadership worried that the laws and strictures of Judaism would not be remembered.  To codify Jewish Law, Rabbi Yosef Caro wrote the "Code of Jewish Law" in Tzfat, in a basement room beneath what is today the "Yosef Caro synagogue", reportedly together with an angel.  Rabbi Alkebetz wrote "Lecha Dodi" in Tzfat.  When Rabbi Yitzhak Luria (the ARI) came to Tzfat, he instituted the custom of beginning Shabbat with the Kabbalat Shabbat ceremony, singing Lecha Dodi and other psalms to welcome the Sabbath.

Other customs which began in Tzfat and are today part of the established Jewish World are the custom of staying awake throughout Shavouth night to study Torah (Tikkun Leil Shavouth) and the Tu B'shevat ceremony.  Both of these customs were derived from Jewish mysticism by the ARI. 

In addition, Rabbi Ya'akov Beirav tried to reinstitute the Sanhedrin in order to reabsorb Jews who had converted to Christianity under duress during the Inquisition.  He was unsuccessful in his attempt to set up a new Sanhedrin, but he was able to use the momentum that he started to impress upon the established Jewish World the obligation to reintegrate the repentant Jews back into Judaism.

Rabbi Yitzhak Luria, the ARI, was recognized during his lifetime as the greatest Kabbalah scholar of all times.  This reputation stands until today.  During the 3 years that he lived in Tzfat he brought new understanding and meanings into the discipline of Jewish mysticism.  He created  the "Luranic Kabbalah" that is mainstream kabbalah study today.  This is the discipline of how Kabala can help us to better our relationship to God and our fellow man.  The ARI studied Kabala in a small cave which sits on the side of the Air Sephardim synagogue (then called the Eliyahu Hanoi synagogue) and is believed to have studied with Elijah the Prophet who came to sit with him while the ARI was studying. 

Throughout the 16th and 17th centuries Tzfat vied with Jerusalem for the title of "most important city".  Among many mainstream rabbis there was discomfort at Jerusalem having been usurped by Tzfat.  The communities of both cities competed for the privilege of having scholars who came to live in Israel settle in their communities.  When the earthquake of 1759 flattened Tzfat, many rabbis declared that it was Tzfat’ "punishment" for daring to "compete" with Jerusalem.  Whatever the reason, the earthquake was the final stroke that finished Tzfat's standing as "Golden City", for the Jews of Tzfat were never able to recover, economically or population-wise.  The greatest scholars no longer flocked to Tzfat, and troubles with local Arab and Druze villages cemented Tzfat’ decline, as did the 1837 earthquake in which close to 4000 residents were killed.