She set it in the heart of Granada (5)
I believe the answer is:
anita
'she' is the definition.
'it in the heart of granada' is the wordplay.
'in the' indicates putting letters inside.
'heart of' means to look at the middle letters.
The central letters of 'granada' are 'ana'.
'it' inserted inside 'ana' is 'ANITA'.
'set' is the link.
(Other definitions for anita that I've seen before include "girl produced" , "-- Loos, US writer" , "Woman" , "- Loos (Gentlemen Prefer Blondes)" , "eg Dobson or Roddick" .)