Old and New Converge in Portugal

By Jean Bond Rafferty Stroll the steep streets of Lisbon, Portugal's capital, on the north bank of the Tagus River, and you'll observe old and new merging in a tantalizing mix. Like a San Francisco on the Atlantic, the city has a gateway bridge and is spread over seven hills crisscrossed by funiculars and trams. Houses, some pastel, some with tiled façades, enchant the eye, and washing still flaps on balconies. But Lisbon's old-world charm is now complemented by modern hotels and restaurants and cutting-edge fashion, culture and nightlife.

"Lisbon is beginning to bloom," affirms Grace Leo-Andrieu, whose company, G.L.A. International, manages Paris's Hôtel Montalembert. Her new boutique hotel, the Bairro Alto (8 Praça Luiz de Camões; 011-351-21-340-8288), opens this autumn in the buzzy neighborhood of the same name. The sunny yellow 1845 town house, with fifty-five rooms and a rooftop terrace, is close to great shopping in the Chiado and Bairro Alto districts, both of which are teeming with purveyors of fashion and home furnishings.

For slinky creations, visit the namesake boutique of designer Fátima Lopes (6 Rua da Atalaia), whose dresses can immediately make their debut at the in-store disco bar. At Cutipol ( 113–115 Rua do Alecrim), locals shop for ultramodern steel cutlery and Marinha Grande crystal. Classic Portuguese buys are irresistible too: porcelain reproductions of antiques at Vista Alegre ( 18–23 Largo do Chiado); lovely linens at Teresa Alecrim ( 76 Rua Nova do Almada); hand-worked silver and gold filigree jewelry (from $40) at Joalharia do Carmo ( 87 Rua do Carmo); and gloves in pigskin and kid (from $40) at the tiny boutique Luvaria Ulisses (also at 87 Rua do Carmo).

On Lisbon's highest hill, in the ancient Moorish quarter of Alfama, a new, hip hostelry—more like a club with rooms—is the Albergaria Palácio Belmonte (14Páteo Dom Fradique;011-351-21-881-6600; palaciobelmonte.com), a beautifully restored 15th-century palace. Its ten breezy—though not air-conditioned—rooms are furnished with antiques and marble bathrooms. They offer spectacular views, but you must climb narrow staircases to reach a few of them.

On another rise, this one above Parque Eduardo VII, stands the Four Seasons Hotel The Ritz Lisbon ( 88 Rua Rodrigo da Fonseca; 011-351-21-381-1400; 800-332-3442). The 282-room hotel attracts celebrities and royalty, who go for the impeccable service, the spacious rooms with private terraces and the Asian-influenced spa and indoor pool.

Down by the river, warehouses have been transformed into nightlife destinations, and two of the most popular spots are co-owned by actor John Malkovich. Bica do Sapato is where chic lisboetas, as residents are called, and visiting rock stars dine on Mediterranean dishes and sushi; afterward, many revelers head next door to Lux, a two-story nightclub (Avenida Infante D. Henrique, Armazém B and A respectively).

Throughout Lisbon, dining is a revelation. At Valle Flôr ( 54 Rua Jau), in the Pestana Palace Hotel, chef Aimé Barroyer's foie gras with strawberries on fig toast is one of many Michelin-star-worthy dishes. In a serene restored convent with an outdoor courtyard at A Travessa ( 12 Travessa do Convento das Bernadas), savor chef Miguel Madaeros's skate with black butter and turnip-blossom risotto. Stop by Pap' Açorda ( 57–59 Rua da Atalaia) to enjoy a local favorite: owner Jose Miranda's açorda, a dish of bread soup with coriander, garlic, shrimp and lobster.

The western neighborhood of Belém is full of cultural sights. The newest is the Museu do Design (Centro Cultural de Belém, Praça do Comércio), home to a fine collection of 20th-century furniture. Lisbon's fabled pastéis de Belém, delicious custard tarts, can be sampled a few blocks away, at the 167-year-old Antiga Confeitaria de Belém (84 Rua de Belém).

Right now, star architects Frank Gehry, Norman Foster and Jean Nouvel are designing elaborate projects that will soon bring even more attention to this wonderful city. Before they build them, come discover what are still the well-kept secrets of Lisbon.