DESALES STREET NW is an odd little thoroughfare. Only one block long, the one-way road connects Connecticut Avenue and 17th Street just above the stately Mayflower Hotel. Although home to ABC News' busy Washington bureau and situated between two bustling corridors, the pace on DeSales is decidedly slower, and its wide, tree-lined sidewalks seem like they belong to another neighborhood entirely.

Panache Restaurant (1725 DeSales St. NW; 202-293-7760), a stylish tapas lounge and bar opened on the block earlier this summer, and so far, it seems to be a pretty good match. The single room is attractive without trying too hard to be trendy, and a long, snaking bar curves down one wall, surrounded by high glass-topped bar tables. French doors that line the front of the building open to a small patio, where seats have been in demand recently.

By virtue of its location, Panache bustles at lunch and again at happy hour. The menu features 36 Italian and Spanish-influenced small plates, great for a quick meal or satisfying end-of-the-day snack. Of course, happy hour is a draw -- $5 house martinis, $4 glasses of wine and sangria, and $3 draft beers are offered from 4 to 7, along with other rotating specials.

Manager Chris Chambers, who mixed drinks at such swank lounges as Ozio and the Russia House, is justifiably proud of Panache's cocktail menu. The Italian Sunrise (Bombay Sapphire gin, Campari and orange juice) is refreshing, while the Italian Ice is based around Grey Goose vodka and Limoncello, a lemon-flavored Italian liqueur.

More intriguing is the house-infused vodka, which Chambers learned to make at the Russia House. He fills a huge glass jug with vodka and seasonal fruit and lets it sit behind the bar for a few days while the vodka absorbs the flavor. Then it's served chilled -- a fresh, natural alternative to trendy imported varieties. (Cherry vodka is featured at the moment, and its tart bite is worth the trip.) Also tasty -- and almost as potent -- is the house sangria, filled with fruit and fortified with vodka. "We try to set it up so it's got a little bite to it," Chambers says. "We're not trying to rip people off."

That's why other drinks -- including mojitos -- are served in pint glasses, and cocktails include top-shelf liquor.

If only there were more room to enjoy it all. Sometimes happy hour finds bar tables are "reserved" for people who want a bite to eat as well as a glass of wine. Chambers explains that the owners "don't want the bar to overrun the food."

Those who can find seats and a cocktail server will rave about the martinis and how intimate Panache is. Others left to hold their drinks while standing in a crowd near the bar will grouse that the lounge is too small. They're all right.

"This is not a big place," Chambers says. "If we get 70 people in here, it's full. But you get a couple people hanging out and you can still have a good time -- I'm a believer in keeping it small."

That changes on weekends, when tables are cleared to make room for dancing, velvet ropes and lines sprout outside and the crowd becomes a younger, more diverse group. (The large semi-circular booths in the dining room can be reserved for any group that promises to spend a minimum of $300.) Saturdays find DJ Seth moving the room with a wide-ranging mix of music -- he thinks nothing of flowing from Lil' Jon and Jay-Z to the Red Hot Chili Peppers and Franz Ferdinand. Somehow, it all seems to fit.