When Pierre L'Enfant laid out the city of Washington, he set the Capitol upon a hill so the city would grow around it on the broad fields above the Potomac and Anacostia Rivers. But the owners of those fields kept the price of land so high that the District sprawled westward instead, onto the cheaper boggy lowlands through which seeped the fetid waters of Tiber Creek.

By the 1880s and '90s, when the Hill finally sprouted buildings, it took on the character of an urban village -- a 15-block grid of turreted brick townhouses, neighborhood parks and stores and the wrought iron fences and stained glass transoms of aspiring gentility.

So it remains, for the most part, today. Reborn in the 1970s after half a century of social and economic decline, the Hill now houses a microcosm of Washington's cultural, architectural and historical life within the shadow of the Capitol dome. At Eastern Market any Saturday young couples in designer jeans and old women in shabby overcoats throng pickup trucks piled with peaches or pumpkins, canteloupes or Christmas trees. Inside, under the lofty, echoing ceiling you can buy a bluefish or a hog maw, discuss Stilton cheese or Virginia ham with an expert, or queue up with court clerks and construction workers for a crab cake sandwich at the Market Lunch. In an era of "boutique" urban markets like Baltimore's Harborplace and Boston's Faneuil Hall, the Eastern exudes a sweaty authenticity: smashed leeks on the concrete floor, fish scales in the sink and the thwack of a butcher's cleaver severing some soup-bound oxtail.

Eastern Market is central to life on Capitol Hill. Neighborhood residents of all ages, races and conditions shop and eat there. Potters twirl their wheels upstairs in a closet- sized studio complete with kilns. Artists exhibit and dancers dance in an auditorium at the market's north end.

One Saturday last spring, I heard music drifting through the auditorium's open doors and drifted inside to find a dozen people transfixed by a cherubic, heavy-set young woman on the stage sawing out Irish jigs on a fiddle. We started to leave when she finished, but then, still unaccompanied, she began to sing --haunting songs of love and rebellion in a soprano magical and true.

"Who is this incredible voice?" I whispered to a couple near me.

"She's our baby sitter," the man said. "She studies music in Dublin and is here for the summer. We thought she should have a chance to sing. So we brought her here."

No one thought that exceptional. It was just another Saturday on Capitol Hill.

"Everything that's great about Washington is right here," says Chris Wright, an aide to the librarian of Congress. Big city amenities meld on the Hill with the livable scale of a small town. "The Marine Band and the National Symphony play free summer concerts at the Capitol. You have the museums right here. I can walk to work. Yet the Hill's small enough to be a real community. Walk up to Pennsylvania Avenue for a beer and I defy you not to see someone you know."

Wright moved to the Hill in 1968, and like others now in their 30s, set about renovating a house. Their work caused the Hill to bloom, turning boarded-up Victorian shells into showpieces of chandeliered restoration with brass carriage lamps and ferns in the bayfront.

"But we couldn't have done it without the people who lived here. A lot of older homeowners had been discouraged by crime and decay. Once they knew we'd help, they went to work, too."

One man's brass carriage lamp, of course, is another man's porch light. One longtime resident of Fifth Street SE joined the flurry of gentrification on his street by painting his fading pink house an even brighter pink.

"I've never known," mused a neighbor, "whether Steve's choice of color was a function of esthetics or territory." Nathaniel Jones, a Hill resident for 30-odd years, does more than his part for the neighborhood, patrolling the alleys near Ninth and Independence SE with his German shepherd, sweeping sidewalks and watching the street from his front porch. His front yard boasts cabbages and tomatoes in season set off by a front walk of Astroturf and he paints and points his brickwork with a vengeance.

"There've been a lot of changes here over the years," he says,"but they've all been good people. The thing is, you got to know your neighbors. You don't have to associate with 'em. But you got to know 'em. That way, when you see a stranger hanging around you know to keep your eyes open."

Don Moore, a lobbyist for the arts, says the social mix on the Hill was one reason he moved there 11 years ago. His block of E Street NE, he says, enjoys an uncommon sense of community, even for Capitol Hill. The white homeowners, however, tend to be liberal young couples with children. The blacks tend to be older and more conservative.

"One black couple is very involved with (the fundamentalist ministry of the Rev.) Jerry Falwell," Moore said. "One of their children goes to Falwell's college in Lynchburg, Va. Last summer they hosted a bunch of kids from the college who came up for a couple of weeks to work in the ghetto . . . really clean, scrubbed white kids. Most of them had never seen the inside of a city and were really into, you know, the whole Falwell thing. Well, there was a party for these kids on the block, and we all pitched in. Let me tell you, it was very interesting. It was a challenge for all concerned. And it came off well. But you wouldn't find that in Georgetown."

Others on the Hill find other riches. Steve McConnell and Shirley Fiske find the neighborhood almost sedate compared to theeroller skaters and disco queens in Venice, Calif., from which they moved two years ago.

"But there's amazing diversity here," says McConnell, a legislative aide, "plus things people here take for granted. Unless you've fought freeways, you can't know what it means to be able to walk to work. And the history and architecture! In California we never lived in a house built before 1950."

Fiske, an anthropologist, sees the Hill as not one community but several -- middle- class blacks, poor blacks, gay activists, renovators -- for whom the geographical unity of the Hill provides a common ground and, at times, disquieting confrontations.

Somehow, however, it works, in part due to what Don Moore calls the "entrepreneurial spirit" of those who live there. Chris Wright agrees. Once during the early 1970s he thought of moving elsewhere, but: "I decided that this was my neighborhood. All of us, black and white, took something run down and made it better. I couldn't leave that behind. The Hill is ours. What the hell, we earned it."