After the expulsion from Spain, many Sephardic Jews moved to the Ottoman empire where they were welcome as useful economic agents (see above). Some settled in the town of Safed, a commercial crossroads connecting Egypt, Jerusalem, Damascus and Beirut. A sixteenth century Italian Jew, Moses Bosola, reported that-

The city [of Safed] is filled with an abundance of good things and excellent foodstuffs- grain, wine, and oil in great abundance and cheap for the person who purchases everything in its season. If it were not for the large amount of oil and grain that they export from there to Damascus and to other places, it [this produce] would have no value. All manner of succulent fruits are available there and whatever is not available locally is imported from Damascus. Trade is widespread in this region, with shops for woolen garments, haberdashery, and spices…He who so desires can deal in grain, wine, and oil, each in its proper season. Generally speaking, there is much more trade in this land than in Italy, for the Muslims purchase more willingly from Jews than from others. [cited in Lawrence Fine, Physician of the Soul, Healer of the Cosmos- Isaac Luria and His Kabbalistic Fellowship, p. 46]

In the 1520s and 1530s, the city’s prosperity and location attracted an increasing number of Jewish scholars, who formed a kabbalistic circle, including Solomon Alkabets (1505-1576), Moses Cordovero (1522-1570), Joseph Karo (1488-1575), and Isaac Luria, who became known for formulating the kabbalistic system that came to be known as “the Lurianic kabbalah.”

Isaac ben Solomon Luria, known as Ha-Ari (1534-1572), was the son of an Ashkenazic father and a Sephardic mother. He studied rabbinic texts and kabbalistic texts while making a living as a merchant. Kabbalah at the time was an small elitist field, and was studied, as Hayyim Vital tells us in his introduction to `Ets Hayyim, only by a limited few. Luria went to Safed in the Upper Galilee to study under the famous kabbalist Moses Cordovero. Luria himself did not leave any writings save for three hymns. What we know about his life and teachings comes almost entirely from the writings of his pupils, particularly Hayyim Vital.
Lurianic kabbalah was a mystical theology that saw in the act of creation, as conceived by the kabbalists, clues to a path to redemption. To simplify greatly, Lurianic kabbalah held that in order to create the world, God needed to create a space. To do that he needed to contract himself/withdraw parts of himself into himself, an act that became known as tsimtsum. Only after that was he able to emanate light/energy in order to create the world. He emanated his energy through ten sefirot, an old kabbalistic concept, that became, in the Lurianic system, the sephirot a sort of receptacles/vessels (kelim) for the divine emanation. The three upper-level vessels received the divine light, but the seven lower-level vessels broke, shattering also the divine light (shevirat ha-kelim, “breaking of the vessels”). All this fell into the abyss. To retrieve the particles (kelipot) and fix the broken vessels (tikkun), God created humans, but the first humans sinned and failed to fulfill their role. The tikkun was now only possible through the observance of the commandments of the Torah. Thus, according to this system, Jews became and essential part of a universal process of redemption. When a Jew fulfilled a commandment with a strong intention (kavvanah), a particle was returned to its place, but with each sin a particle fell back into the abyss. Once all the kelipot, particles, would be gathered, the Messiah would come. The Lurianic system thus emphasized the role of individuals and individual actions in the process of redemption.

This theory or its various parts became increasing popular among learned Jews because of access to some of the sources in printed books. Scholars of Kabbalah disagree to what extent Kabbalah as a system of cosmology became popular, but it is indisputable that kabbalistic elements became widespread in rabbinic writings, liturgy, and ritual. It is through the latter two that kabbalistic ideas reached even the illiterate strata of society. Among the new rituals and practices introduced by the kabbalists were those of kabbalat Shabbat (the welcoming of the Sabbath), a third Shabbat meal in addition to the traditional two, study vigils on Shavuot, marital sex as an aspect of the Sabbath on Friday nights, and various penitential rituals.