It is said that after so many decades of trying to become Western, Istanbul glories in the rediscovery of a very modern identity. European or not, it is one of the coolest cities in the world.

Spend a summer night strolling down Istanbul's Istiklal Caddesi, the pedestrian thoroughfare in the city's old Christian quarter of Beyoglu, and you'll hear something surprising. Amid the crowds of nocturnal revelers, a young Uzbek-looking girl plays haunting songs from Central Asia on an ancient Turkish flute called a saz. Nearby, bluesy Greek rembetiko blares from a CD store. Downhill toward the slums of Tarlabasi you hear the wild Balkan rhythms of a Gypsy wedding, while at 360, an ultratrendy rooftop restaurant, the sound is Sufi electronica—cutting-edge beats laced with dervish ritual. And then there are the clubs—Mojo, say, or Babylon —where the young and beautiful rise spontaneously from their tables to link arms and perform a complicated Black Sea line dance, the horon. The wonder is that each and every one of these styles is absolutely native to the city, which for much of its history was the capital of half the known world.

The sounds of today's Istanbul convey something important. They're evidence of a cultural revival that's helping the city reclaim its heritage as a world-class crossroads. After decades of provincialism, decay and economic depression—not to mention the dreary nationalism mandated by a series of governments dominated by the military—Istanbul is re-emerging as one of Europe's great metropolises. "Istanbul is experiencing a rebirth of identity," says Fatih Akin, director of this summer's award-winning film "The Sound of Istanbul" an odyssey through the city's rich musical traditions. Akin grew up in Germany but during the past decade has rediscovered his Turkish roots. "There's such richness," he says. "So many people have crossed Istanbul and left their culture here."

A renaissance in the city

Signs of renewed self-confidence are everywhere. The city is still thickly atmospheric, with bazaars, Byzantine churches and Ottoman mansions pretty much everywhere. But that faded grandeur has recently been leavened with new energy. Stock markets are surging. Young, Western-educated Turks are returning home to start businesses. Foreigners are snapping up choice real estate. Turkish painters, writers, musicians, fashion designers and filmmakers are increasingly in the international spotlight. Two major new private museums devoted to Turkish art, the Istanbul Modern and the Pera Museum, have opened in the past year alone. Private galleries like GalerIst and Platform are showcasing, and fostering, new artists from Turkey and around the region.

The city's renaissance is part and parcel of Turkey's embrace of Europe. It's no accident that the Modern's opening was pushed up last December to coincide with the European Union's decision to begin accession talks with Ankara. Turkey's drive to "join Europe" undergirds the economic reforms that have given both Turks and foreigners the confidence to invest and buoyed the country's prospects. Inflation is in the single digits for the first time in 30 years, unemployment is down and GDP growth is more than 9 percent. Reforms pushed by the EU—from its insistence that the military step back from politics to human-rights and free-speech liberalizations—have reshaped Turkey's political and social landscape. At bottom, Istanbul's new look would not have been not be possible had the country's government not been so determined to prove its Western credentials.

In every area of life, a new generation of young Turks is reaching outward. This year's Art Biennale will draw artists from Bosnia, Iran, Egypt, Greece and Lebanon—a most uncommon mix—while the Web Biennale will feature work by Armenians, Ukrainians, Serbs, Macedonians and Romanians. "Istanbul these days has as much dynamism as New York," says Genco Gulan, director of the Istanbul Contemporary Art Museum . If anything, he enthuses, "Istanbul is more alive. There's more interest here in doing something new."

Forcing the borders

That cultural vibrancy has come hand in hand with a physical renaissance, the likes of which Istanbul hasn't seen in a century. Begin with Beyoglu, an area of grand 19th-century apartment buildings reminiscent of Budapest or Vienna that was largely abandoned by its Greek and Jewish inhabitants in the 1950s and became a Kurdish and Gypsy slum. "Fifteen years ago, you'd be afraid to go there," says Gulen Guler, a film producer who lives in the neighborhood. Fusion restaurants, organic grocers and designer candle shops now abound, along with the city's trendiest shops, galleries, design studios and clubs—many of them standouts of contemporary design. Beyoglu is also home to a growing colony of young foreigners buying up cheap apartments. "This place is attracting people away from very cool scenes elsewhere, like Berlin," says Andrew Foxall , one of the owners of 20 Million, a design and photography studio in Cukurcuma, the artiest of Beyoglu's enclaves.

The rise of Beyoglu is a good metaphor —for Istanbul as a whole. At its best, it showcases all that's original and vibrant in the city. At its worst, it does just the opposite—testifying to Turkey's cultural insecurities. Yes, the melting pot that is the Istiklal Caddesi is genuine enough. But what to make of the Fransiz Sokak, a whole street filled with faux French cafes and restaurants, complete with baguettes and piped accordion music? Contrast that with the restaurant Dilara's Abracadabra, whose owner, Dilara Erbay , conjures up a truly innovative new food culture based on traditional seasonal rhythms. "This is Anatolia, a very spiritual and holy place," says Erbay. "Anatolian food is alive, all the old stories are there. We prepare special foods when someone dies, when they are born, when guests come. You can tell all your life in food." Erbay's next big thing is Sufi cuisine, simple and pure food eaten from a communal bowl "to symbolize love and oneness," rooted in Turkey's ancient culture of Sufi Islamic mysticism.

It's a constant tussle, this East-West divide. For years being cool and innovative has long meant, simply, being Western. More and more Turkish artists are rediscovering their own voices, grounded in their own traditions rather than borrowed ones. Listen, for instance, to the weird, haunting melodies of the dervish rituals that shape the mesmerizing electronic music of Mercan Dede, who mixes Sufi classical music played on the ney (a kind of flute) with computer beats. Look at the upper floors of the Pera Museum, dedicated to the work of young Turkish artists. (One female painter crowns her angry self-portrait with a Byzantine-style gold halo; a digital photomontage of horses and soldiers turns what might have been a battle of classical Greece and Persia into something resembling a videogame; in one photo of a large mosque, minarets tilt at 45 degrees, evoking missiles.) Or try on some of designer Gonul Paksoy 's sumptuous Ottoman-inspired gowns made of antique silks and rich embroidery. These are all signs of a cultural voice growing from within, and no longer imported from abroad.

Not all the new art is a celebration. Filmmaker Kutlug Ataman, shortlisted for last year's prestigious British Turner Prize, cuts close to Turkey's sociocultural bone. His latest video installation, "Kuba" constructs a communal portrait of life in an Istanbul shantytown, voice by voice. The subjects range from criminals, drug addicts and teenage delinquents to religious radicals and the poor—an uncomfortably real slice of daily life at the margins.

Bold artistic voices like Ataman's are bound to collide with Turkey's many taboos—nationalist versus European, modern versus traditional, secular versus religious. While bright young things drink and flirt in expensive Beyoglu restaurants, the more numerous poor look on in bewilderment and not a little disapproval. Outside one trendy record shop specializing in reggae and rap, graffiti on the wall reads RAP NO—MUSLIM YES. And just a hundred meters from the lively bars of Istiklal, an armored personnel carrier stands permanently parked outside the police headquarters on Tarlabasi Boulevard, ready for use during the sporadic disorders among Tarlabasi's largely Kurdish minority.

Istanbul and its artists are testing new political limits as well. Aynur, a Kurdish singer featured in "The Sound of Istanbul" recalls that when she started performing 10 years ago, police would pull the plug on her. With new laws (another nod to the EU) authorizing broadcasts in Kurdish, she can now sing wherever and whenever she wants. But, she says, "I only wish these changes were happening because we really believed in them, not because we're becoming members of the EU." Even novelist Orhan Pamuk , whose books have been a huge success in Turkey and the West, was pilloried by nationalists earlier this year when he dared to ask what had happened to the Armenians of the Ottoman Empire in 1915, when hundreds of thousands were killed.

Still, taken together, the changes have been dramatic. For decades now, Greeks and Turks have lived in enmity. Yet the Pozitif photo gallery in Galata is currently hosting a show of stark images from Imroz, a Turkish Aegean island with a tiny, and dying, Greek population. It's a sad exhibit, says photographer Murat Yaykin, but "it's important to tell the story" of how Greeks and Turks not so long ago lived side by side in harmony. A huge crowd also turned out last month when Greek singer Aliki Kayaloglou performed poetry by Greek poets Elytis, Kavafis and Sappho, as well as Turkish poet Nazim Hikmet, set to music by contemporary Greek composer Manos Hadjidakis . Greek contemporary pop sells well in the record shops on Istiklal.

Perhaps most encouraging is the fact that, as Istanbul goes, so goes much of the rest of the country. The megalopolis accounts for roughly 45 percent of national industry, 55 percent of GDP and 60 percent of the country's exports. A whole generation of young Turks, educated abroad, is now being drawn back to their homeland, stoking the city's dynamism. Memduh Karakullukcu, 35, schooled at MIT, Columbia and the London School of Economics, worked as an investment banker and consultant in Europe and the United States before returning to head Istanbul Technical University's prestigious technology incubator. "For the first time, living in Istanbul doesn't mean that I'm left out of the major social and financial networks," he says. "I can be part of all that from here." These new repatriates bring a worldliness and an openness their parents' generation lacks. "There's a cultural shift. Both Turks and foreigners are excited about the possibilities of the city, which has been a well-kept secret for so long," says Oya Eczacibasi, chairwoman of the Istanbul Modern.

Europe may yet balk at admitting Turkey to its Union. Yet the world won't end if it does. All signs suggest that Istanbul will continue to re-create itself, perhaps even more energetically. Remember the sounds of Istanbul's streets—European and Turkish and Balkan and Middle Eastern, all coming together in a strange but beautiful harmony.