A full day and night in Granada  is the minimum and allows you to explore the streets, sleep somewhere interesting, and enjoy a good meal or two. But a lot of Granada’s charm lies in the interesting excursions reachable if you use Granada as a base camp. Leave half a day for a boat ride in Las Isletas  and another day for Volcán Mombacho .
Most people devote another day for visiting the pueblos and markets in Masaya . While you could conceivably day-trip to the Laguna de Apoyo  as well, the hotel options make it a fun place to stay (when was the last time you woke up inside a volcano crater?).
From Granada's central, tree-lined plaza, a.k.a. Parque Central and Parque Colón  look south to the giant Volcán Mombacho. Just behind the cathedral on the park's east side, Calle La Calzada  runs due east about one kilometer to the municipal dock on the lake. A lot of the lodging and restaurants lie along this street or within a block or two of it.
At the lake, a paved road runs south along the water’s edge to the Malecón  (waterfront), a would-be tourist complex that’s emptier than it should be, but remains a peaceful, wooded, lakeshore walking park. An easy taxi ride farther south are the marinas that provide boat access to the isletas  and Zapatera .
West of the plaza is the Xalteva (pronounced more or less, with a hard “h”) neighborhood and eventually the cemetery  and road to Nandaime . In this neighborhood, one block west of the Plaza, is Calle Atravesada, running north-south between the old 1886 train station (now a museum, which has closed for lack of funds) to the bustling chaos of the municipal market. This is one of Granada ’s main thoroughfares and a modern commercial center, of sorts, for banks, movie theaters, and the like.
Most of what you’ll want to visit or see lies in the kilometer between the lake and the plaza, and it’s all walkable. That’s really the best way to enjoy the city, but you’ll be better off if you do your walking in the early morning when the sunlight is golden and the air temperature is still pleasant. Taxis are numerous and cheap if the heat really has you down. Better yet, hire a horse-drawn carriage  from the west side of the plaza for an open-air local’s view of town.