La Latina
Just about everyone likes to enjoy a drink or a meal outside when the weather's good, and the madrileños are no different. From April to October, Madrid's sidewalks and plazas are taken over by thousands of tables and chairs and bar life becomes terraza life. On a terraza, the cigarette smoke isn't as oppressive, the people-watching is great, and the drinking or dining experience takes on a new, light- and sound-filled dimension.
Madrid's got all sorts of terrazas, but some rules of thumb apply to the vast majority. First, be prepared to pay a bit more than inside. Most bars or restaurants add a price supplement for outdoor service, which is often around 10% (but so worth it!). Second, the best terrazas are nearly always full, so your best bet is to wait patiently, keeping your eye out for tables with empty drinks or plates. Respect the order of others who are waiting, but when it's your turn move quickly and assertively to avoid confrontations. Third, chances are service will be a bit slow. Many of these sidewalk cafés are understaffed for the number of tables they are serving, so, again, patience is a virtue. But relax, you're in Spain, and even in the capital things don't move very quickly.
Which terraza to pick? My main recommendation is to not patronize the ones in Plaza Mayor. Though the square is very pleasant, these terrazas tend to be pricey and low quality because the only people who go there are tourists. You'd do best to keep your eye out for people chattering in Spanish, to stay away from places with photos of the food they serve, and to check out any in the following barrios:
Malasaña
Plaza del Dos de Mayo Photo: Tnarik
In Plaza del Dos de Mayo, one of Madrid's most storied squares in the heart of an equally emblematic neighborhood, you've got two pizzerías and two normal bars with terrazas. Take your pick. You can also walk up Calle San Andrés to Plaza Juan Pujol (at Calle Espíritu Santo) where there are a couple more.
Conde Duque
Plaza de las Comendadoras
Across the street from the cultural center of the same name (housed in former military barracks), there's a string of terrazas beginning in the Plaza Guardia de Corps, continuing along tiny Calle Cristo, and culminating in the Plaza de las Comendadoras, a truly pleasant square next to a convent.
Lavapiés
Calle Argumosa Photo: Caribb
An afternoon or evening spent on tree-lined Calle Argumosa is pure bliss. There's a constant stream of terrazas along this street from the metro entrance in the plaza to mere meters from the Centro de Arte Reina Sofía. Head uphill from the plaza on Calle Lavapiés if you'd prefer to eat Indian food under the trees. And if rooftops are your thing, head to Gaudeamus Café, which sits atop a university library housed in a former church at Calle Tribulete 14.
La Latina
Since it's one of the most happening neighborhoods in Madrid, it's no surprise that the terrazas here are almost always full. My personal favorite is Taberna Angosta, which is hidden away in a bend of Calle Mancebos behind some trees and a church. It's small and quiet, but very popular with those in the know. Those on Plaza de la Paja are extremely popular as well, and worth trying though they'll lighten your wallet considerably.
Go further:
Against The Elements: Dining Out In London