The Treaty of Granada, signed in 1491, granted certain rights to the Mudejars (Muslims who remained in Spain after the Reconquista). The most significant impact was that they were allowed to worship freely as Muslims. However, in the following years, particularly under the pressure of the Spanish Inquisition and the consolidation of Catholic rule, many Mudejars faced increasing restrictions and eventual forced conversions. Therefore, the correct answer to how the Treaty of Granada affected the Mudejars living in Spain is:
They were allowed to worship freely as Muslims.