If we want everything to stay the same, everything must change." This often-quoted phrase is from the classic book about Sicily, The Leopard, but it could just as easily be applied to Venice, which has been for decades fighting to survive. To keep from sinking into the lagoon, the city has launched one of Europe's most ambitious engineering projects: a system of tide-blocking barricades scheduled to start operating in five years. Further slowing the decay, the municipal board has begun allowing more and more of its ornate palazzi to become hotels. And to drag itself into the 21st century, Venice has commissioned works by such architects as David Chipperfield, Lawrence Nield, Vittorio Gregotti, and Santiago Calatrava. The latter's futuristic Grand Canal bridge connects Piazzale Roma with Santa Lucia train station and will be in place this spring.

For travelers the most obvious improvement is in the hotels. A law passed in 2000 permits families to take in paying guests without getting tied up in red tape, a move that forced Venice's notoriously complacent big hotels to polish up their dusty rooms and overhaul their service. While they catch up, the vanguard has moved away from the mega and toward the petite: The best new hotels in Venice have 14 and six rooms, respectively. The larger one, Ca Maria Adele, stands near the eastern tip of the Dorsoduro neighborhood. The style is Il Settecento Venice meets zen minimalism, with geometric wenge-wood furniture beneath ornate chandeliers and wood beams. The devoted Alessio Campa, one of two brothers who opened the place, heads the staff, who are as enthusiastic as their leader. Close to the Frari church, Oltre il Giardino is the smaller hotel, an elegant locanda with a lovely front garden. It once belonged to Alma Mahler, the composer's widow; the present owners, Alessandra Arduini Zambelli and her son, Lorenzo, have transformed it into a stylish home away from home, incorporating a country-house mix of antique furniture, Edwardian portraits, pastel walls, and daring touches (there's a purple cowhide rug in front of the downstairs fireplace).

Cultural preservation also appears to be an inspiring force in Venice. Take, for example, Un Mondo Divino, a tiny new wine bar just north of the Rialto. It heaves with locals sipping red wine and grazing on cichetti at the rustic wood counter. The place seems for all the world like an age-old bacaro; in reality, it has been open for about a month. Over in the Rialto market area, a handful of recent arrivals have returned a workaday quartiere to the bustling hub it was in the 18th century. Bancogiro, on pretty Campo San Giacometto, offers a brief but interesting menu of seafood dishes, such as grilled squid with radicchio and cinnamon. New neighbor Naranzaria serves regional specialities like D'Osvaldo prosciutto and radicchio di Treviso. Both spots offer tables out on the wharf—a prime piece of Grand Canal frontage that until recently was off-limits to all but market stalls.

In nearby Campo Bella Vienna, Muro is one of the few new restaurants aiming for high modernism—all polished steel and sharp angles. Less than a year old, it's already an insiders' hangout (yes, that is the maître d' from Harry's Bar), where Bavarian Josef Klostermaier—a former professional ice hockey player—has established himself as Venice's chef to watch. Klostermaier uses whatever is fresh at the Rialto market in sly combinations: Tuna tartare, for example, might come with mango carpaccio, citrus, and extra-virgin olive oil. Beyond the reborn Rialto hub, one of the most compelling new restaurants is Avogaria, a bare-brick outpost in Dorsoduro. The boxy tables seem to call for minimalist fusion dishes; in fact, the menu is centered around good old home cooking—this time from Puglia.

If there's fresh vigor on the scene, thank Venice's modest yet influential population of artistic types: architects, writers, restorers, graphic designers, gallerists. This moneyed international brigade loves to go out, and its presence has boosted the city's dwindling number of residents (currently at 66,000, down from 175,000 in 1951).

But Francesca Bortolotto Possati, owner of Hotel Bauer and a Save Venice chairman, is not particularly worried by these figures. "That's going to turn around sooner or later," she says. What troubles her is the global-brand infestation—from Prada to Lush—that makes Venice look like any other European city. Still, Bortolotto Possati sees signs of encouragement: An upcoming generation of serious artisans are reinvesting in the city—even in such places as the Piazza San Marco, the most trampled square in Italy. The family-owned jeweler Nardi, creator of the famous Moor-head brooches, recently vowed to carry pieces made predominantly by local craftsmen in its San Marco flagship. Soon Piazza San Marco will welcome the first Venetian boutique by a prodigal daughter, Roberta di Camerino, who designed the famous Bagonghi handbag. The growth of established companies has helped other artisans to flourish, too. In her shop near the Guggenheim, French artist Hélène Kuhn paints and prints silk in autumnal colors and sews them into scarves, shawls, ties, and jackets ($150-$1,500). And in the Palazzo Grassi area, fabric designer Chiarastella Cattana's outlet is now an essential source for interior designers. Her delicate botanical-motif brocades ($130-$240 for three yards) are made on old-fashioned three-meter looms by weavers in the Veneto. This is the city's mantra: Small scale, high quality, and local.

Address Book

CA MARIA ADELE Rates, $470-$700. At 111 Dorsoduro; 39-041/520-3078; www.camariaadele.it
OLTRE IL GIARDINO Rates, $200-$400. At 2542 San Polo; 39-041/275-0015; www.oltreilgiardino-venezia.com
AVOGARIA Dinner, $120. At 1629 Dorsoduro; 39-041/296-0491
BANCOGIRO $ Dinner, $70. At 122 San Polo; 39-041/523-2061
MURO Dinner, $135. At 222 San Polo; 39-041/523-7495
NARANZARIA Dinner, $80. At 130 San Polo; 39-041/724-1035
UN MONDO DIVINO At 5984A Cannaregio; 39-041/521-1093
CHIARASTELLA CATTANA $ At 3357 San Marco; 39-041/522-4369
HELENE $ At 683 Dorsoduro; 39-041/523-7605
NARDI At 69 Piazza San Marco; 39-041/522-5733; www.nardi-venezia.com

Insider Tips

Michela Scibilia's VENICE BOTTEGHE ($27; Vianello Libri) is an invaluable resource for finding authentic Venetian shops.

Muse, the new boho-chic collection of clothing by designer MASSIMO CECCONI (www.musecomo.it), mixes wool, silk, and beaver fur.

The housewares shop MADERA (2762 Dorsoduro; 39-041/522-4181) forgoes Venetian frills in favor of simple, stylish designs in wood, ceramic, and glass.

BANCO NO. 10 (3478A Castello; 39-041/522-1439) sells unexpectedly chic handbags and clothing designed and made by inmates of Venice's female penitentiary.

This year's ART BIENNALE (www.labiennale.org) runs from June 12 to November 6.

One of the leading figures on the city's contemporary art scene is MARIA MORGANTI. Her colorful abstracts are sold by the online gallery www.italianarea.it.

$ Establishment accepts no charge/credit cards or accepts cards other than the American Express Card.