Monaco is a sovereign city-state country. The country consists of a single city.
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The capital of The Principality Monaco is Monaco Ville, which is the small district on top of the Rocher (or Rock). This is where the government buildings, parliament and town hall are located. Other well known districts of Monaco are Monte Carlo, famous for its casino and luxury hotels, La Condamine (the port area), Fontvieille (the industrial district reclaimed from the sea).
The capital of Monaco is also called Monaco. It's really to do with the (tiny) size of the place. To avoid confusion the capital is sometimes now referred to as Monaco-Ville, and consists of the "Old Town" that sits upon "The Rock". It is the original "Monaco", and home to the Prince's Palace, Oceanographic Museum and many original Monagesque families also live here on the seaward end. So Monaco is the original town, but through history the borders have eventually become fixed and now incorporate the three other areas of Monte Carlo, Fontvielle and La Condamine. Since the whole lot is governed by Monaco, it is all Monaco now, and you will hear Monaco-Ville being said to refer to "The Rock". It all comes down to expansion and the way the town / principality has grown. If you go there, you would swear it is no more than a mere town in France with its own police and laws, whereas politically it is a country.
It's its own country, a principality. It's an indepentent city-state of France. Monaco's capital and largest city is Monte-Carlo.
The whole of Monaco is basically one big city, although there are ten differently named parts, mainly Monte Carlo.