I can't say for sure, but it is likely because the capital was chosen before Rio de Janeiro gained its current size and economic importance. Other countries have this phenomenon as well. For example, both Canada and the USA have capitals that are not their largest cities and many of their provinces/states have capitals that are not their largest cities.

On April 21, 1960, the city of Brasilia was officially inaugurated and started functioning as the new capital of Brazil. Its population today is about 1,750,000 inhabitants (satellite cities included). Shifting the capital from Rio de Janeiro to the heartland was actually quite an old idea. Hipolito Jose da Costa was supportive of it at the turn of the previous century. Jose Bonifacio presented a bill to the Constitutional Assembly of 1823, which was to be dissolved by Dom Pedro I (Emperor of Brazil). All Constitutional Assemblies held after the Republic (1891, 1934, 1937 and 1946) had provisions for the change. There were several reasons why such a measure should be taken: - Fear of invasions. Brazil had been systematically invaded in the past (by the French, the Dutch and even by the Portuguese, after Independence). Having the capital (Rio de Janeiro) by the sea made it very vulnerable. - Helping develop the heartland. - Security reasons. A smaller city would be easier to control in the event of riots or the like. Also, popular demand would be of lesser extent. The first Republican constitution (1891) went as far as defining where the future Federal District would be - a rectangle within the State of Goias, in the heart of the country. But it was not until 1956, after eight years of surveying, that the actual design and construction of the new Capital began under President Juscelino Kubitschek. The competition for the urban master plan was won by Brazilian architect and urban planner, Lucio Costa. The major government buildings were designed by the Brazilian architect Oscar Niemeyer. Landscape designer Roberto Burle Marx planned the layout and selection of plant varieties to add a vivid green backdrop to the otherwise dry, yellow landscape of the savanna vegetation.

Actually, Rio de Janeiro is not the biggest, or even the most important city in Brazil. The city of Sao Paulo is the biggest in population, as well as it functions as the country's economic center. Rio de Janeiro is however, the most famous, and perhaps prettiest city, but it is certainly not the most important or biggest city.

As in many other cases (Washington, Canberra) they wanted the capital not to "belong" to any one of the states, which would thereby have an unfair advantage, or so it was seen. The capital is not the largest city, it is the one with all the Ministries and headquarters of national organisations. If the main ministry is local to you, you have an advantage over someone who has to travel thousands of miles to it. So they mast the ministries not local to anybody.

"The city(Rio de Janeiro) was the capital of Brazil for almost a century... from 1763 to 1822 while it was a Portuguese colony and from 1822 to 1960 as an independent nation." "It was the de facto capital of the Portuguese Empire from 1808 to 1821." "It was Brazil's capital until 1960, when Brasília took its place." "When Prince Pedro I proclaimed the independence of Brazil in 1822, he decided to keep Rio de Janeiro as the capital of his new empire. Rio continued as the capital of Brazil after 1889, when the monarchy was replaced by a republic." All this is taken from the source http://www.factsnfacts.com/geographical_facts/cities_facts/rio_de_janeiro_facts/

Just add the two answers from wickedwilly, and ronca28 and you will have all you need.....Rio is better known around the world as the Brazilian postcard.

The same reason California being America's biggest and most wealthy city is not its capital.

It was and it was moved to Brazilia.