Potsdam's earliest documented mention is from July 3, 993. The 13-year-old east Franconian-German king - Emperor Otto III – named the area Poztupimi (translated as "Beneath the Oaks"), and presented it to his aunt, the Abbess Mathilde of Quedlinburg. This first settlement is believed to have once been the site of the destroyed Church of the Holy Ghost, and acastle was built adjacent to the ancient Slav settlement. The importance of Potsdam rested on the resulting control of the Havel river crossing.
In 1536, a terrible fire destroyed large parts of the city, the rebuilding resulting in an expansion of territory. Potsdam consisted of 192 houses in 1573, however, was destroyed once again during the Thirty Years' War. A mere 50 taxable house owners still remained in Potsdam by 1660.
The Elector Frederick William took over the government of Brandenburg in 1640. He chose Potsdam as his second residence after Berlin. Shortly thereafter, the construction of the prestigious Stadtschloss palace began in the Old Market square.
With the decree of the 'Edict of Potsdam' in 1685, the Great Elector offered a new homeland in Brandenburg to the Huguenots whom had been expelled from France.