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Vatican City is a sovereign state located within the city of Rome. With an area of 44 hectares (110 acres), and a population of about 1,000,[3] it is the smallest state in the world by both area and population. However, formally it is not sovereign, with sovereignty being held by the Holy See.

It is an ecclesiastical[3] or sacerdotal-monarchical[7] state (a type of theocracy) ruled by the Bishop of Rome – the Pope. The highest state functionaries are all Catholic clergy of various national origins. Since the return of the popes from Avignon in 1377, they have generally resided at the Apostolic Palace within what is now Vatican City, although at times residing instead in the Quirinal Palace in Rome or elsewhere.

Vatican City is distinct from the Holy See (Latin: Sancta Sedes),[g] which dates back to early Christianity and is the main episcopal see of 1.2 billion Latin and Eastern Catholic adherents around the globe. The independent city-state, on the other hand, came into existence in 1929 by the Lateran Treaty between the Holy See and Italy, which spoke of it as a new creation,[8] not as a vestige of the much larger Papal States (756–1870), which had previously encompassed much of central Italy. According to the terms of the treaty, the Holy See has "full ownership, exclusive dominion, and sovereign authority and jurisdiction" over the city-state.[9]

Within Vatican City are religious and cultural sites such as St. Peter's Basilica, the Sistine Chapel and the Vatican Museums. They feature some of the world's most famous paintings and sculptures. The unique economy of Vatican City is supported financially by the sale of postage stamps and tourist mementos, fees for admission to museums, and the sale of publications.