Until recently, visitors to Madrid’s central tourist area were warned away from the adjacent old hillside district of Lavapies. The former medieval Jewish enclave and working-class immigrant ghetto had a bad reputation, with muggings depressingly common.

Now, though, the area has been restored, with cobbled streets, period streetlamps — and a far more visible police presence. Flats have been tarted up, intellectuals have revived cafes, ethnic eateries have improved, musicians play flamenco and jazz, and now reborn Lavapies is a colourful global village, Madrid’s melting pot.

Local resident Ian Gibson, author of books on Spain’s main cultural figures, loves the invigorating and eclectic buzz in the air.

“Lavapies is a multiracial village a stone’s throw from the centre of Madrid. There’s a mix of ageing local Spaniards as well as the immigrants. Little shops and Arab, Chinese, Indian and Pakistani restaurants thrive.”

City style: Madrid

From Old Masters to modern minimalism, Spain’s capital is the apex of cultural cool

• Rest assured: Madrid's best hotels

• Where party animals stay in Madrid

• Madrid awaits new wing of Prado museum

10 things I love about Spanish food

The author of a new book on Spanish food reveals exclusively his favourite tastes of Iberia

• Spain's perfect paella

Related Internet Links

• More articles on Spain

Related Links

• City style: Madrid

• 10 things I love about Spanish food

Where to go: the hub of the barrio is Plaza de Lavapies: radiating from here are numerous narrow streets. Pavement cafes and interesting shops throng Calle Argumosa, which leads to the Reina Sofia modern-art museum, where Picasso is king.

Heading up the hill from the plaza are two streets lined with Pakistani-run restaurants and old bohemian bars. Down Tribulete, with its Arab tearooms and Indian shops, one reaches La Corrala, a typical local 19th-century tenement block that has lost one side, exposing washing hanging like entrails.

Up the hill, take a glass of vino tinto at the historic Taberna de Antonio Sanchez, full of bullfighting memorabilia. Further up, on the corner of Cabeza and San Pedro Martir, a large plaque adorns the apartment block where

Picasso lived as a student from 1897 to 1898. Ladies serve nice canapés at Taberna del Avapies (corner of Cabeza and Lavapies), once an Inquisition prison. Not far away is the charming Cine Doré. This 1923 art-deco jewel houses several mini cinemas, a cafe, shop and the national film library.

The place to watch the sun set over the russet-tiled jumble of old Lavapies is at the Gaudeamus roof-terrace bar and restaurant. After that, you can head for local jazz, flamenco or a languid copa.

Where to stay: the slick boutique Vincci Soho (Prado 18; 00 34-91 141 4100, vinccihoteles.com ; doubles from £99) is five minutes from Lavapies. Cheaper and closer is Hostal Cervelo (Atocha 43; 91 429 9594, hostalcervelo.com; £41). Students can share at Mad Hostel (Cabeza 24; 91 506 4840, madhostel.com; from £17pp).

Where to eat: fill up for about £20 each on hearty Asturian bean stew, tangy blue cabrales cheese and dry cider at Casa Lastra (Olivar 3; 91 369 0837, casalastra.com), around since 1926. For good-value curries, go to Moharaj (Ave Maria 26; 91 467 8602). Vegans enjoy El Granero de Lavapies (Argumosa 10; 91 467 7611).

For tapas and an evening rooftop view of Lavapies, join the in-crowd at Gaude­amus (Tribulete 14, 4th floor; 91 528 2594; closed Sun). Elsewhere, there are good wines and tapas, at about £9-£13, at cosy Aloque (Torrecilla del Leal 20; 91 528 3662). Cheaper are Taberna el Sur (Torrecilla del Leal 12; 91 527 8340) and Casa de Asturias (Argumosa 4; 91 527 2763).

Where to drink: in the evening, artsy folk meet at the thoroughly decadent Nuevo Cafe Barbieri (Ave Maria 45; 91 527 3658), which looks as though it hasn’t been decorated since it opened in 1902.

What to do: go shopping at the Reina Sofia modern-art museum gift shop (Santa Isabel 52), and then along Argumosa and Tribulete, with curiosities at Comics el Coleccionista (Tribulete 7); visit the fun potter’s shop at Arte Hoy (Cabeza 26); check the films and shop at the national film library (Cine Doré, Santa Isabel 3; www.mcu.es/cine/MC/FE/CineDore/Programacion.html).

On Sunday mornings, the huge Rastro flea market is held just west of Lavapies. There’s live jazz at the modernist El Despertar (Torrecilla del Leal 18; 91 530 8095) and flamenco at midnight at Casa Patas (Cañizares 10; 91 369 0496, casapatas.com; booking essential).

Getting there: there are flights to Mad­rid from Heathrow, Gatwick, Stansted, Luton, Bristol, Edinburgh, Liverpool and Dublin. Airlines include Iberia (0870 609 0500, iberia.com), British Airways (0844 493 0787, ba.com), EasyJet (easyjet.com), Ryanair (0871 246 0000, ryanair.com ) and Aer Lingus (0870 876 5000, aerlingus.com ).

Times recommends

• Oasis of the Seas: the Times review
• The 20 best new year party places to stay
• Green Spaces 2009: are you the winning writer?