Cities should be constructed in locations with plenty of Food and Production and with access to Strategic, Luxury, and Bonus resources. It is often a good idea to build a city on a River or coastal hex, as sources of water are very important to a growing Population. Cities constructed on Hills gain a defensive bonus, making it harder for enemies to capture them.
With a Settler selected, ideal city locations will be shown on the map with an icon. Additionally, every Settler after your first will show the Settler Lens, giving you an idea of where on the map will provide the best source of water for your city, and indicating unavailable tiles.