Prague flourished during the 14th-century reign (1346–1378) of Charles IV, Holy Roman Emperor and the king of Bohemia of the new Luxembourg dynasty. As King of Bohemia and Holy Roman Emperor, he transformed Prague into an imperial capital and it was at that time the third-largest city in Europe (after Rome and Constantinople).
He ordered the building of the New Town (Nové Město) adjacent to the Old Town and laid out the design himself. The Charles Bridge, replacing the Judith Bridge destroyed in the flood just prior to his reign, was erected to connect the right bank districts to the Malá Strana and castle area. On 9 July 1357, Charles IV personally laid the first foundation stone for the Charles Bridge. . In 1347, he founded Charles University, which remains the oldest university in Central Europe.
He began construction of the Gothic Saint Vitus Cathedral, within the largest of the Prague Castle courtyards, on the site of the Romanesque rotunda there. Prague was elevated to an archbishopric in 1344, the year the cathedral was begun.
The city had a mint and was a center of trade for German and Italian bankers and merchants. The social order, however, became more turbulent due to the rising power of the craftsmen's guilds (themselves often torn by internal fights), and the increasing number of poor people.
The Hunger Wall, a substantial fortification wall south of Malá Strana and the Castle area, was built during a famine in the 1360s. The work is reputed to have been ordered by Charles IV as a means of providing employment and food to the workers and their families.