During the 4^th Crusade and after the fall of Constantinople in 1204, Crete was assigned to Boniface of Montferrat, who then sold the island to the Venetians. However, in 1266 Crete was occupied by the Genoan count of Malta Enrico Pescatore and the Genoans, the enemies of Venice, looted and destroyed the city. It took 8 years for Venice to regain control of the island.
From 1210 to 1252 Venice struggled to establish its authority in western Crete, as it faced strong resistance from the locals. In 1252, the prefecture was divided in 90 feuds assigned to the Venetian settlers, who in return were ordered to reconstruct the city of Chania.
The Venetians settlers then constructed the wall of Kasteli and organized the new urban plan of the city within the walls, according to Venetian standards. A new modern city was then constructed within the city walls and significant private and public buildings were built, such as the Cathedral of Panagia (Virgin Mary), the house of the Rector and the houses of the Venetian Commanders.  The public buildings were built lengthwise the central road (corso- today the street "Kanevaro") that crosses Kasteli to the east.
The imposing Gothic style entrances of the Venetian palaces were preserved until the beginning of the 20^th century. A residential district developed around Kasteli known as "vourgoi", which means "suburbs". 

The fortification of the city started in 1336 and its construction lasted for 20 years. In the beginning of the 14^th century, the monastery of Aghios Fragkiskos (St. Francesco) of the Franciscans was built, as well as the monastery of Aghios Nikolaos of the Dominican monks. Catholics dominated the urban centers of Crete, in contrast with the rural areas where Orthodox religion was predominant. There are few remains from the first period, when the city was limited in Kasteli, as earthquakes and other natural disasters caused a lot of damage.

The city of Chania developed to the second city of "the Kingdom of Crete" and it became the headquarters of the Rector and of the Latin Bishop. The city and its port became the center of a rich agricultural region, with strong economic and cultural relations with Venice. Gradually, the city extended outside the old fortress, and the reconstruction and modernization of the city walls was necessary. Thus, in the mid-16^th century the city was re-fortified under the supervision of the famous for his fortification works Μichele Sanmichielli, who designed modern walls with a trench, which was never filled with water.  Within the new limits of the city -which also included the portside-, a better urban plan was designed and temples were built or renovated, as well as large public and private buildings, in line with the doctrines of the Venetian mannerism.

A new aqueduct was constructed, as well as several military buildings. The 22 dockyards ("Neoria") were also constructed, which were used to shelter and repair the Venetian ships during the winter. The islands of Theodorou, Souda and Gramvousa were also fortified.

However, the local population remained loyal to its Christian Orthodox and Greek origins and strongly resisted the Venetian settlers. From 1212 until the end of the Venetian period, the Cretan population organized 27 revolutions. The leaders of these revolutions came from the families of the "12 lords", who maintained their feudal privileges from the Byzantine period and were distinguished by their material and intellectual wealth, as well as by their loyalty to the Orthodox dogma. 
The role of these prominent families and of the Church was of great significance during the revolutions. Despite the efforts for cultural submission, western culture never managed to dominate over the local culture. However, through time these two cultures managed to coexist -always in hostility- and some cultural exchange took place. This cultural exchange resulted in the "Cretan Renaissance", a bright period when Cretan artists and intellectuals created masterpieces in literature, architecture and painting.