Here is a method to do what you have asked, specifying the circle centre and radius:
import numpy as np
import matplotlib.pyplot as plt
z = np.zeros((400,400))
# specify circle parameters: centre ij and radius
ci,cj=232,145
cr=20
# Create index arrays to z
I,J=np.meshgrid(np.arange(z.shape[0]),np.arange(z.shape[1]))
# calculate distance of all points to centre
dist=np.sqrt((I-ci)**2+(J-cj)**2)
# Assign value of 1 to those points where dist<cr:
z[np.where(dist<cr)]=1
# show result in a simple plot
fig=plt.figure()
ax=fig.add_subplot(111)
ax.pcolormesh(z)
ax.set_aspect('equal')
plt.show()
I used ax.set_aspect('equal')
to show that it is indeed a circular region. I leave other aspects, like checking that the circle falls entirely within the bounds of the domain, up to you.