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Dedicated to Our Lady and San Juan de Letrán the chapel takes the name of Capilla de Nuestra Señora y San Juan de Letrán (Chapel of Our Lady and San Juan de Letrán). It is located over an older chapel, possibly built by Alfonso VIII, on a plot in La Latina, owned almost entirely by one of the most powerful families in Madrid, the Vargas family. It was precisely a member of this family, Francisco de Vargas, who commissioned the building of the chapel in 1520. Work was finished on it in 1535 by his son Don Gutierre de Vargas y Carvajal, the Bishop of Plasencia, and from whom the chapel took the name by which it is most popularly known, since its real name is the Chapel of San Juan de Letrán.

It is a splendid building, representing the transition from the Gothic style (nave and apse, roof with Gothic ribbed vaults) to the Renaissance style (door and interior decoration). Built as a chapel belonging to the church of San Andrés, to which it was originally joined, inside it has a magnificent main altarpiece, the work of Francisco de Giralte from Palencia and a disciple of Berruguete, who completed it around 1550 with the collaboration of Juan Villoldo el Mozo, who did the colouring work.

In 1931, it was declared a National Monument.