It's behind the main road in Arroyo. If you go to Manferga roundabout and walk a little way down Av de Federico Garcia Lorca (by the children's playground) you will see an opening to your right. You can't miss it! There is also a big stage there and entertainment all evening. A great night!

Excellent directions (above) and, to avoid any confusion, the square is actually Plaza de la Mezquita (see link). Yes, a great place to be on New Year's Eve.
http://bbs.keyhole.com/ubb/showflat.php/Cat/0/Number/513354

thanks for all your reply's, is it anywere near hotel bali, marina, triton sorry dont no the area that much

It is about a 15 minute walk to the square from Hotel Bali - all up hill going and you can roll home after New Years Eve there. (do not confuse with Bonanza Square which is also near to Bali)
It is on the way to the Railway Station from the Bali - not hard to find - anybody will tell you where it is.

Was there 07/08 new years eve.Absolutely heaving from 10.00 onwards. There were still people celebrating at 5.00 am.Great friendly crowd.