Hello! I am planning to go to Lisbon as well and I am selecting where to stay... hotel or self-catering apartment...
I heard about the beaches and chiado!

Sintra, Obidos, Evora, Fatima etc. I don't suggest heading to the Algarve as it is pretty dead this time of year and the weather is very iffy.

You won´t need a car in Lisbon, but it might not be a bad idea to rent one for the 5 days to explore. Otherwise, I would suggest taking a day trip to Sintra, Evora and Cascais. Then, for those 5 days, head north to Porto, and use it as a base to explore the north.

We visited two years ago Lisbon in the last week of December. We stayed at a hotel near Rossio Square; it was a very good and central location, near metro and railway station.

Lisbon is so beautiful and you have so many things to visit and see! Below you can find what we visited each day:

First day - arriving early in the morning after night flight
Rossio Square
Santa Justa Elevator
Praca de Commercio
Praca Restauradores
Rua Augusta
Av. de Liberdade


2nd day- Take Tram 28 for a view of the city ; go to Alfama
Mirador de Santa Luzia, St. Jorge Castle, Monasterio St Vicente, Decorative art Museum, Se Cathedral

Then, Estrela Church

In the evening - Centro Colombo ( mall)

3rd day
- Figueira Square
- Belem (Jeronimus Monastery, Discovery Monument , Coach Museum
Ajuda Palace

4th day
Fronteira Palace --- SUPERB ! Don't miss it; make a reservation by email. It is a beautiful residence, with splendid rooms with 17th and 18th century decorative tiles, frescoed panels and oil paintings.

Gulbekian museum
In the evening - restaurant Senhor Vino (good Fado singers)

5th- Sintra ( Pena castle,National Palace)
Queluz Palace --- very rich decoration; splendid gardens with a lot of statues

6th day
Tile museum -- Strongly recommended. The highlight of the museum is composition of 1300 tiles, 23m length, of Lisbon's cityscape made in 1738.

Parque das Nacoes -- very modern buildings and statues , nice views
This was New Year's Eve; we spent it at Sacramento restaurant; it was close to our hotel, so we could walk to / from there and at midnight we went out to see fireworks. The menu was very good.

7th day - Cascais

We had no car. In Lisbon we use metro, tram and taxi (cheap).
We travelled to Cascais and Sintra by train (clean, very cheap).

We spent two weeks in Portugal over new years in 2010/2011. We had an excellent vacation, but here is our trip report: http://www.fodors.com/community/europe/bikerscott-jamikins-in-portugal-20102011.cfm

We will also be in Lisbon for several days with our sons (19, 20), including NYE. So, this is a great thread!

Does anyone have any specific recommendations for NYE and (of more concern) New Year's Day? I had a day trip tour planned for that day, but I have just been informed it is not going to be running on that day - so need to come up with an alternative plan.