What happened to Washington? A lot of Americans still view their capital as a bureaucratic command center inhabited by hill staffers and petty criminals, offset by a steady flow of belligerent protesters and eighth-graders on field trips. Financial minds also used to regard D.C. as irrelevant to their work—that is, until Washington started signing the checks.

Nowadays, Washington brandishes a new reputation and reality: the city's recent upswing into a vibrant urban personality is the result of a perfect storm that combines national economic recovery, neighborhood gentrification and a political sea change. A younger and more outgoing administration has filled the halls of power, and the capital is responding at every level.

In terms of income and jobs, the Washington, D.C. metropolitan area is now the second most powerful urban economy in the United States (after Seattle). Inhabited by the highest-educated and highest-paid young professionals (ages 25 to 40) in America, the new Washington has exchanged its stuffy collared self for a more glamorous approach to both life and business.

Once a truly government town, the private sector now accounts for one of every three jobs inside the District of Columbia. Defense contractors like Lockheed Martin and government consulting giants like Booz Allen Hamilton used to dominate Washington's economy, but after more than a decade of diversification, the capital's moneymakers run across the board, including law firms, publishing companies, professional associations, nonprofit organizations, higher-education institutions, and software and engineering innovators like America Online. The cluster of financial headquarters (Fannie Mae, Freddie Mac, Sallie Mae and Capital One) and the presence of energy giants (AES and Pepco) make Washington a focal point in the recovering economy. Of the world's Fortune 500 companies, 50 have offices in D.C.

Washington's consolidated financial and decision-making powers have made government relations an important growth industry. "There was never any doubt that we would headquarter our international consultancy in Washington, D.C.," said Karen Tramontano, CEO of Blue Star Strategies, an international strategy and government affairs firm. "The nation's capital is alive with history, represents a vigorous democracy and offers a robust multicultural experience to be cherished."

The field of government relations has transcended traditional local, state, and national interests to become a priority for major international corporations. Current events are constant reminders that whatever happens in Washington does not stay in Washington, rather it affects the whole of global trade, industry, and finance. The ongoing dance between Wall Street and Capitol Hill has savvy business minds focused on securing a stake in Washington and its many moving parts.

The rest of the world seems to be following the trend—Washington appears ready for the increased traffic, starting with global air travel. In 2009, over 23 million passengers transited through Washington Dulles International Airport, of which more than 6 million were international travelers. This year, Dulles finally replaced its people carriers (or "mobile lounges") with a high-tech, sleek underground AeroTrain that links terminal to concourse and drastically cuts down on connection times. These changes—along with a major refurbishment of the airport and a vast improvement in general services—make Dulles an optimal international hub favoring, but not limited to Star Alliance partners.

Direct flights now link Washington to major world cities like Beijing, Seoul, Tokyo, Moscow, Johannesburg, Buenos Aires, and Doha, not to mention over a dozen trans-Atlantic flights every night that include a few all-business-class airlines. Another bright spot on the horizon is the recent opening of the Dulles Corridor Metrorail Project, a $2.6-billion endeavor that will link airport to the city's Metrorail system by 2013.

Such major infrastructure investments trail the building boom of recent years. While prices lag and fall elsewhere in America, Washington's residential and office real estate remains steady. Moreover, several thousand brand-new luxury hotel rooms have opened up in the last two years. Among them is Donovan House—a kind of beyond-luxury design hotel towering over Washington's Thomas Circle. Thompson Hotels' bold foray into the capital comes with indulgent king-size beds, lots of cheeky royal purple hues and shiny black leather.

Celebrating more traditional D.C. tastes, the recently made-over Jefferson Hotel blends elegant colonial interiors with modern comforts like four-poster beds, toile drapes, and velvet settees—all within blocks of the White House. Another revamped hotel just opened across the street from the Treasury Department, where Starwood properties breathed new life into the old Hotel Washington, turning the chandeliered ballrooms and history-filled hallways into a wild and whimsical W hotel. The POV rooftop terrace lounge is still the ultimate cocktail conversation place, with a coveted view of the Mall and the Secret Service atop the White House.

Washington's newest hotel is The Melrose, located between Georgetown and Foggy Bottom. Expressly aimed at business travelers, everything from the decor and feel to the Wi-Fi are designed to make your work in Washington pleasant. The rooms steer clear of the latest minimalist fads, offering a homey, upscale living room atmosphere. That same mood prevails in the hotel's Library Bar, where a martini menu fuels political chat among stashes of books.

For a more unusual stay, check out the DC Guesthouse. Just one block from Washington's massive new convention center, the upscale private B&B is home to one of the most eclectic art collections in the city and a favorite home-away-from-home among repeat business travelers.

Unbeknownst to some, art matters in this city. Washington's blithe Parisian aesthetic of grand boulevards, circular fountain parks, and tree-lined vistas reflect the grand vision of city planner Pierre L'Enfant, the neurotic French architect who designed the city to appear beautiful from any angle.

Today, that same French style pervades—the Sofitel on Lafayette Square flies the tricolor flag, greets guests with a "Bonjour" and serves delicate pistachio macaroons in its marvelous iCi Urban Bistro. In-house chef Olivier Perret loves the proximity to power, saying, "The White House is my backyard. I open my kitchen door and there it is, and right next to it is the market where I get all my vegetables every Thursday." Within months of moving into the White House, first lady Michelle Obama helped establish the weekly farmers market.

With a changing population comes a dramatic change in taste, from fashion to food. The Washington, D.C. of yesteryear featured a Spartan culinary landscape that catered to a Midwestern political palate: red-carpet steakhouses and fancy French restaurants of the Julia Child kind are no more. Today's fashion for fresh, high-quality, and adventurous dining—demanded by a population that can pay for it—means that Washington restaurants have upped their game in a big way. Name any cuisine, and you'll find it in D.C., three different ways.

Swinging U Street gets a lot of attention for its old-fashioned speakeasies and hip dining hotspots, like Masa 14—a concept-rich blend of Latin American and Asian tapas. Still, it's Washington's downtown that feeds the city's real decision makers. The illustrious eatery Bibiana Osteria-Enoteca wows a cast of media personalities and big business nightly, with spectacular, unexpected Italian food and creative cocktails. Similarly, the reverential Oval Room (just steps from the actual Oval Office) offers diners one of the best tasting menus in town, co-invented by its new chef and wine list whiz kid.

So then, where do the Obamas dine out? Most recently at Komi, a Greek-influenced gourmet nexus, where getting a seat for an hour or so of the set menu can be a challenging experience. The point is the first couple does go out—lots—to enjoy the huge range this city has to offer. Their active social life reflects the city's new vibe. Washington, D.C. is no longer the boring backwater on the East Coast that gets projected on C-SPAN. Rather, the cosmopolitan capital is a business town that takes its fun very seriously.