If my arms were just a few inches longer I could touch the floodlit minarets of the Blue Mosque as I hang out of the window, drinking in the impossibly romantic scene surrounding me. I've been to Istanbul countless times but I never tire of being here. After all, this is ancient Byzantium, imperial Constantinople, the place where the Roman Empire morphed into the louche decadence of the Byzantine Empire. As Istanbul, it was the great imperial capital of the Ottoman Empire.

This was the place that officially introduced Christianity to the western world as a state religion rather than an underground cult. It was, for nearly 1,000 years, the capital of the Islamic world and it was the end of the Silk Road, the greatest trade route on the planet. Istanbul is the only major city that stands at the edge of two continents, one foot in Europe and one in Asia, divided by the Bosphorus. It is thousands of years old. And it is stunningly, staggeringly beautiful, if ragged around the edges.

My hotel, the Mas Evi (Blue House) is one of a positive army of restored Ottoman mansions in the old city. In the pavement cafe below me, a solitary dervish is whirling in stately, rather sad splendour, his religious ritual demoted to a tourist attraction as the backpackers around him ignore the performance in favour of the honey-flavoured nargile (hubble-bubble pipes), lounging back on carpeted benches like denim-clad pashas.

A small, rather shaky sign points the way to the Mozaik Müzesi, a vast mosaic floor which is all that now remains of Emperor Justinian's Imperial Palace. Over to my right are the heaped ochre domes of Justinian's greatest masterpiece, the 6th century basilica of Aya Sofya, church then mosque and now museum.

I can't see it from where I am but a few minutes' walk to my right is the sprawling Topkapi, the Ottoman Imperial Palace, which takes at least a morning to explore on its own. It's a sort of babushka doll of a place with courtyards within courtyards, pavilions tucked within those and maze-like suites of luxurious rooms behind small insignificant doors. In its day, it was, quite literally, the centre of the universe, home, court and government - with many thousands living and working here at the hub of an empire which stretched from the gates of Vienna across North Africa and deep into Asia.

Down the hill, in the outermost courtyard of the Topkapi, the Archaeology Museum houses another great treasury of ancient wealth from across Anatolia and beyond, from the gates of Babylon to the world's first peace treaty, signed in ancient Egypt. All this history and more just in Sultanahmet, one tiny corner of this huge city; it is literally breath-taking.

Across the square, where I can see the flicker of the son-et-lumière gearing up for the French show, is the Yerebatan Sarayi (Underground Palace), actually a Byzantine water cistern of vast dimensions and grace, much of it built from recycled classical stone so the soaring columns have unlikely inscriptions. It is a popular venue for concerts.

It should be busy this year - Istanbul is in a feverpitch of artistic excitement, as one of Europe's three Cities of Culture for 2010. It was slow to get into gear, but now the calendar is bulging with special events from photo and art exhibitions to concerts, open-air festivals and several new museums including Nobel Prize winner Orhan Pamuk's Museum of Innocence (tied in with his book of the same name).

The change in the city has been palpable since I first start coming here about 20 years ago. It's a strange two-way tug. Even while the more religious government is quietly encouraging fashionistas to adopt the veil (albeit an extremely glamorous version in silks and satins), the artistic community is noticeably breaking free of the strong Islamic tradition which kept it bound for centuries.

The arrival of wonderful new museums and galleries, such as Istanbul Modern and the Sak?p Sabanc? Museum, and festivals including the Bienniale, Contemporary Istanbul (each November) and the City of Culture itself have burst open creative floodgates, just as the revival of the Turkish economy has transformed the modern city, creating a new skyscraper business centre filled with plate glass and slick cocktail bars in the eastern districts beyond Taksim. This is a city that is rediscovering itself, hour by hour, and watching it flex its wings is truly fascinating.

One slight downside to this is that while Turkey is still good value (outside the eurozone), prices have risen steeply. Getting there is cheaper than ever with the advent of low-cost flights and there are still plenty of back-street cafes where you can get a kebab for a couple of lire. However if you want the views, Ottoman court cuisine or the increasing array of chic designer restaurants and clubs that grace the new city around Istiklal Caddesi and Taksim or the shores of the Bosphorus, expect to pay international prices for jetset pleasures.

It's worth splashing out. While the humble kebab might dominate, Turkish cuisine is one of the great culinary traditions of the world. The aubergine is also ubiquitous, but Ottoman chefs had 150 different ways of dealing with it. Whether you choose to eat köfte (meatballs) at Hamdi's near the spice market or sup in style at 360 with its trendy international fusion menu and eclectic club nights, you can find an element of theatre along with your meal.

The same goes for shopping. In the city filled with the world's finest flirts and greatest traders, you could visit one of the many modern malls in the posher suburbs but it's not nearly so much fun as a trip to the spice market or the Grand Bazaar for tea and haggling. Wander the alleyways between the baskets of lucky blue beads, mounds of saffron and peppercorns and sugary lokum (Turkish Delight), gleaming silver jewellery, leather bags in a kaleidoscope of colours and fake designer labels. And everywhere a magical fantasy of intricately patterned rugs from all corners of Anatolia, souvenirs with memories to last a lifetime.

istanbul facts

When to go
As a major city, there is something good going on at any time of year, but the best times are in spring and autumn.

Getting there
Easyjet (www.easyjet.com) and Pegasus (www.flypgs.com) both have low-cost flights into Sabiha Gökçen Airport on the Asian shore;Turkish Airlines (www.thy.com) costs slightly more but flies into Atatürk International on the European shore. UK tour operators offering short breaks to Istanbul include Anatolian Sky (www.anatoliansky.co.uk), Classic Collection Holidays (www.classic-collection.co.uk),The Discovery Collection (www.discovery-collection.com), and Istanbul-based Exclusive Travel Turkey (www.exclusivetravelturkey.com).

If you want to be conveniently located for sightseeing and stay in a charming small hotel, look at staying in the Sultanahmet. If you prefer somewhere convenient for restaurants and nightlife or the larger, glossier hotels, head for Beyoglu (the new city). To escape from the crowds with a little luxury, look at one of the boutique hotels down near the water on the Bosphorus.

More information
Turkish Culture and Tourism Office: www.gototurkey.co.uk
Istanbul City of Culture 2010: www.en.istanbul2010.org
Istanbul travel guide: www.turkeytravelplanner.com/go/Istanbul

Useful Reading
Istanbul (DK Eyewitness Top 10 Travel Guide) by Melissa Shales: £7.99.

All prices and details were correct when published in tlm - the travel & leisure magazine, please check before you travel to Istanbul.