In 1560, King Philip II of Spain appointed Menéndez as Captain General, and his brother Bartolomé Menéndez as Admiral, of the Fleet of the Indies. Thus Pedro Menéndez commanded the galleons of the great Armada de la Carrera, or Spanish Treasure Fleet, on their voyage from the Caribbean and Mexico to Spain, and determined the routes they followed.

In early 1564 he asked permission to go to Florida to search for La Concepcion, the galeon Capitana, or flagship, of the New Spain fleet commanded by his son, Admiral Juan Menéndez. The ship had been lost in September 1563 when a hurricane scattered the fleet as it was returning to Spain, at the latitude of Bermuda off the coast of South Carolina. The crown repeatedly refused his request. In 1565, however, the Spanish decided to destroy the French outpost of Fort Caroline, located in what is now Jacksonville. The crown approached Menéndez to fit out an expedition to Florida on the condition that he explore and settle the region as King Philip's adelantado, and eliminate the Huguenot French, whom the Catholic Spanish considered to be dangerous heretics.

Menéndez was in a race to reach Florida before the French captain Jean Ribault, who was on a mission to secure Fort Caroline. On August 28, 1565, the feast day of St. Augustine of Hippo, Menéndez's crew finally sighted land; the Spaniards continued sailing northward along the coast from their landfall, investigating every inlet and plume of smoke along the shore. On September 4, they encountered four French vessels anchored at the mouth of a large river (the St. Johns), including Ribault's flagship, La Trinité. The two fleets met in a brief skirmish, but it was not decisive. Menéndez sailed southward and landed again on September 8, formally declared possession of the land in the name of Philip II, and officially founded the settlement he named San Agustín (Saint Augustine). St. Augustine is the oldest continuously occupied settlement of European origin in the contiguous United States. It is the second-oldest continuously inhabited city of European origin in United States territory after San Juan, Puerto Rico (founded in 1521).