It is unclear when the first Jews lived in Zefat.  Archeologists have discovered a 3500-year-old implement in the wadi near Zefat, so it is known that there was some sort of settlement here at that time.  However, documenting the first Jewish settlement is less clear. 

Archeologists believe that the Zefat citidel was one of the "stations" where fires were lit to announce the coming of the new Jewish month.  When 2 witnesses to the New Moon testified at the Temple in Jerusalem to having seen a New Moon (new month), a fire would be lit there to notify surrounding Jewish communities of the month's commencement -- this insured that Jews throughout the area would be celebrating Jewish holidays in sync.  Communities along the pipeline would light their own fires when they saw the fire in Jerusalem, and again, more communities would light their fires when they saw those of the nearby towns.  Zefat's citidel is believed to be on of those stations.

Josephus wrote about stationing a battalion of Jewish soldiers in "Sepph" in the war against the Romans, and many historians believe that the area that he was speaking of was Tzfat, but again, there is no archeological evidence to support that.

A recent building project on Tzfat's main street uncovered many Roman-era tools and implements which were not "in-situ", meaning that they were not in their original spot.  A local archeologist theorized that when the Crusaders built their fortress on the Citadel, they leveled the area, knocking down the hill all artifacts that had been there previously.  This indicated that there was a community that had lived on the citadel prior to the arrival of the Crusaders.  But little is known about who the community might have been, or when they lived there. 

Finally, several writings have been found which describe a town with a name similar to "Tzfat" where families with Cohenic (priestly) names fled to in the years (up to the 4th century A.D.) after the destruction of the Temple by the Romans. It is thought, by historians, that it is Tzfat which is being referred to.   

Any Jewish community which was in Tzfat when the Crusaders arrived in the country was probably massacred when the Crusaders built their first fortress on the citadel.  By the time the Crusaders were ready to build their second fortress (after the Moslems destroyed the first) they had evidently decided that leaving a local population in the area was to their benefit, and they built their fortress, as they wrote "between the Jewish synagogue and the Moslem Mosque.