During the first half of the 19th century, Bilbao grew without a plan. Constrained within a municipal area that prevented it from expanding, the demand for housing was resolved by increasing the height of the urban fabric and allowing for an increase in the density of occupation. In 1842, Madoz made a description of the town that can serve as an indication of its situation immediately before the need for a large urban expansion project began to be considered. He recorded a population of 10,243 inhabitants who lived in some 900 houses, distributed in 36 streets. In its entirety, the buildings occupied the Old Town and its traditional suburbs. In 1860, a year before the annexation decree of Abando and the start of the Expansion Plan of Amado de Lázaro, the population was already 15,747 and 90% of the buildings had three or more floors. The total built-up area, which remained practically the same as in 1842, was 28.94 hectares. So, by the time of the annexation, the commercial town had already reached a dangerous density limit.
Finally, in 1861, Isabel II issued the decree that allowed the extension of Bilbao to the Vega de Abando and part of Begoña. The plan was entrusted to the engineer Amado de Lázaro. His main reference was Ildefonso Cerdá's plan for Barcelona, of which he only knew the graphic part but not the entire conceptual apparatus. The use of the square and open block of 113 meters, with its chamfered corners, like so many other things, refers to it. Amado de Lázaro started from the basis that Bilbao was going to increase its population by 50,000 inhabitants in the next 150 years. He adopted Cerdá's density standard, giving 40 m2/inhab. To do this, he made a complete calculation of the use of the entire surface of his plan, dedicating 35% to patios and gardens, another 35% to plots of land and 30% to streets.
In 1862 he presented the project. It occupied some 254 hectares, of which 229 were in the Vega de Abando and constituted the fundamental part. As for its layout, the solution adopted was very interesting. On the one hand, two large backbone axes were defined, one in a north-south direction and another in an east-west direction, which crossed in the centre. By choosing this orientation, the resulting city was fitted onto the edge of the course of the estuary, even planning a dock, which would have its link with the railway station. In turn, the station was one of the fundamental references for the entire layout, whose most important artery started from it. But the grid of blocks did not have the same orientation as the main axes. It was not oriented in a north-south direction, but had been rotated 45º with respect to the central axes and was in a northeast-southwest direction. This meant that many diagonal streets appeared. Faced with this problem, Lázaro adjusted the shape of the blocks so that the entrances in the main streets were perpendicular. In this way, he divided the layout into four quadrants articulated from the central cross. Within these quadrants, the streets were arranged diagonally with square blocks. Only at the intersection the central axes and the quadrants displaced 45º with respect to these, he was forced to organize pentagonal and hexagonal blocks, to resolve this rotation of the building layout with respect to the axes. The blocks remained open and construction would only be carried out on two or three sides of them. This decision allowed him to protect the sides most exposed to the northwest winds with built fronts. The extension's limits were closed by a tree-lined perimeter promenade, finished off by a large semicircular plaza to the south and a park at the western end. As for the width of the streets, he planned that they would generally be 20 metres wide, for the same height of the building. He gave the streets of the backbone 50 metres and those of the ring road 30. At the confluence of the 20-metre streets he increased the width to 40. In this way the circulation problems were solved with solvency.
The Plan was branded as utopian and excessive, due to the amount of time, space and building surface that it intended to cover. It was branded as excessively ambitious and unrealisable, but its quality was not questioned. Amado de Lázaro had made a series of mistakes without realising that, however good the layout was, those mistakes condemned it. Firstly, the proposed street widths were unviable for the City Council, because it would have to pay for most of the works for its urbanisation and obtain the land either by expropriation or by reaching agreements with the owners. Lázaro had defined an extension in which a third of the total land was to be used for roads. This was about 84 hectares. The capacity of the Bilbao City Council in terms of urban management was completely overwhelmed. Secondly, it was a plan that only dedicated 35% of the land to the urban development.