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My husband and I are American live in Lisbon. We are back in DC to apply for Visa through Portugese embassy in DC. Our American friends who live in Lisbon and are trying to get visas in Lisbon, it is a nightmare.

That is correct. You must apply for a visa in the states and then when that is granted you take that visa and turn it in for a residency visa. You could possibly pay someone to take all of your documents to the embassy in the states for you, I'm not sure. But I just recently got the D7 retirement visa for my mom and we had to do it all here in the states before we could go to Portugal. Good luck!

Excellent information. Will start visa in states asap.

Judy,

SHORT ANSWER:  You may not begin  the process to immigrate to Portugal while present in Portugal.  Sorry.

LONGER ANSWER:
Immigrating to Portugal for non-EU citizens is a Two-Step Process, each with specific, though somewhat confusing, names

1st Step- 
A)  Apply for a Portuguese Residence VISA.  The Portuguese Residence VISA is regulated by the Schengan Agreement and Portuguese law.  You may see the Portuguese Residence VISA referred to as a "Schengan Area Visa".
B)  Obtained from a Portuguese Consulate in the country of your residence.  For example,  Americans apply for the  Portuguese Residence VISA from one of the several Portuguese Consulates in America, such as San Francisco or Washington DC.  You may NOT apply for the Portuguese Residence VISA  while physically present in Portugal.  Sorry, again.
C)  Required documents:
  1.    Completed Application form for a Portuguese Residence VISA (Schengen Area Visa).  Available online.
  2.    Passport that is valid for at least 6 months after the expiry date of the visa for which you're applying (which will be valid for 4 months)
  3.    Two recent passport-size color photos
  4.    Personal statement declaring the reasons why you wish to obtain Portugal residency
  5.    Proof of financial means / proof of sufficient funds
  6.    FBI criminal record certificate (and, if you've lived outside the US in the last year, a police record report from that country)
  7.    Proof of private health insurance coverage, including repatriation cover
  8.    Proof of accommodation in Portugal (property title deed, rental agreement, letter of invitation or property loan agreement),
D)  The Portuguese Residence VISA, when granted, is for a 120-day period during which you MUST travel to Portugal to advance to the 2nd Step.

2nd Step-
A)  Once in Portugal on your 120-day Portuguese Residence VISA, you must apply for your Temporary Residence PERMIT.  Note: 1st Step, in America for example, yields a VISA, the 2nd Step in Portugal yields a PERMIT.
B)  The Application for Temporary Residence PERMIT is lodged at the offices of the Serviço de Estrangeiros e Fronteiras (SEF).  See website .  Offices are located throughout Portugal. 
C)  Once granted, the  Temporary Residence PERMIT is valid for one year and you are permitted to remain in Portugal.  You may also you move freely about the Schengan Area countries.  NOTE: You must renew the Temporary Residence PERMIT before the one year expires.  This is also at the SEF.  You will be then granted a 2-year Temporary Residence PERMIT.  In addition to being able to remain in Portugal, you are allowed to move freely about the Schengan Area countries.

I hope this helps.

Robbie

Thank you so much! This is very helpful!!!

My husband and I were in the same situation and yes you do have to be int the US and send your passport to the Portuguese Embassy to have the residency visa added to your passport.  The visa had an appointment scheduled for your residency permit interview.  Our was 3 months later the the visa date.  You must enter Portugal with the residence visa in your passport. They would not add it to you passport in county.    Hope this helps. 

Now I am trying to determine what documentation is required for the residency permit interview.  Anyone with knowledge on that would love to hear.

Robbie,  Any idea what documentation is required for the interview in Portugal for the residency permit?  We have our residency visa and an appointment for interview in FEb.  Thanks much.