Ellicott City, a mill town carved out of a rugged valley south of Baltimore four years before the American Revolution, is marked by narrow streets, stone 19th century buildings, a shortage of parking spaces and a multitude of homeowners with a proud sense of history.

But this month, the small city displayed a flashy touch of big-town rejuvenation. A freshly refurbished, blue and red trolley -- modeled on vehicles that stopped running there 30 years ago -- began traveling along a steep hill to the Main Street area in the town's historic business district. It was filled with weekend shoppers.

"As soon as I saw them I knew that this old mill town had come back," said Sally Bright, who lives in a century-old house overlooking Main Street and has played a role in the town's revitalization efforts for 20 years.

"There was a time I wasn't so sure it would."

Eight miles north of the new town of Columbia, Ellicott City was founded on the Patapsco River in 1772 by three Quaker brothers, John, Joseph and Andrew Ellicott, and has been the seat of rural Howard County since the county was established in 1851.

Residents say that Main Street, with its granite-and-iron store facades and tiny churches, still resembles images on post cards produced more than a century ago.

The past year has brought many signs of a renaissance. Stores started catering to upscale customers, rents rose and business hours expanded. Only last fall, streets in the historic district were virtually empty on weekdays and many shops opened only on Saturdays. Now, visitors prowl its 140 shops for handmade crafts and brass furnishings all week.

Until recently, many residents say, the town had undergone nearly 25 years of neglect. The historic district, with its neighborhood taverns and wooded yards, had become a favorite haunt of drifters. Several of its oldest landmarks, including a grand hotel and girl's finishing school, had fallen into disrepair.

Merchants and developers decided it was time to halt the decay. The town's historic charm should no longer be one of the area's best-kept secrets, they argued. Rather, the town should be transformed into a regional, perhaps even a national, attraction, rivaling Annapolis and Alexandria in tourist appeal.

"I like to say that the town was in its resting phase," said Enalee Bounds, who opened a country store on Main Street 25 years ago. "I think people are starting to recognize the potential that's here."

Ellicott City -- a picturesque mixture of European village and Western movie set -- has always had a quaint appeal, say its admirers, who point to the town's eclectic architecture, dusty antique stores and humble working-class beginnings.

Residents and business owners attribute the recent revival to a new sense of professionalism and commercial drive that has come as large chunks of property have changed hands.

People have upgraded properties and sought to attract wealthier customers, said Nancy Gibson, president of the Ellicott City Business Association. Rents for retail space have increased from $3 to $4 a square foot to between $12 and $18 in the last few years. Two- and three-bedroom apartments that rented for $350 a month have been converted into one-bedroom units costing $450 to $600.

"The people who you have here now have a real financial stake in their businesses, and it shows," said Donald R. Reuwar, a developer whose firm entered the Ellicott City market 18 months ago and now manages one-third of the commercial properties in the historic district. What the town needs now, Reuwar said, is more diversity, including additional clothing stores and personal services such as a tanning parlor.

Emmett Peake, a former bookkeeper who has purchased nine buildings on Main Street, agrees. Peake recently reopened a shopping complex but has kept some sites vacant to avoid duplicating existing crafts and other shops.

The town's revival has not been totally smooth. Several businesses, including a diner and a kitchen supply store, closed because they could not afford to pay higher rents. Several low-income families, who had lived for years in inexpensive apartments above stores, were forced to move.

But most business owners have welcomed the changes. "Customers say, 'Wow, look what's happened to Ellicott City.' They don't say, 'Oh, Ellicott City isn't how it used to be,' " explained Melissa Fulton, who this month opened a theme store selling Maryland memorabilia. "They're delighted to see the changes."

History is widely viewed as one of the town's major selling points. A depot where Baltimore & Ohio Railroad trains used to stop to load flour ground at the Ellicott brothers' mill still stands beside the Patapsco River. Now the site of a volunteer-run museum, it is said to be the world's oldest railroad terminus.

Nature also has left its imprint on Ellicott City. The town's main shopping area, a half-mile strip, has been devastated by summer floods six times in 200 years. In 1984, when merchants were still rebuilding from the damage caused by tropical storm Agnes in 1972, a fire destroyed six two-story row houses in the center of town.

But businesses have been rebuilt. Leideg's Bakery, one of the stores demolished in the fire and a Main Street staple for more than 40 years, has returned. A high-priced French restaurant has moved into the restored quarters. A bed-and-breakfast inn and a riverfront entertainment complex are among the projects being discussed.

"As sad as it was, the fire was really the turning point," Peake said. "It forced people who weren't already concerned to think about the future of the town."

Business owners credit County Executive Elizabeth Bobo with taking an active interest in the town's renovation. The county parks department this summer hired a crew of five teen-agers to help spruce up the Main Street area, and the economic development office is working with the local merchants association to launch a promotional campaign.

"Look what's happened to Annapolis in the last 10 years," said Eric Feldmann, the county economic development coordinator. "The same thing could be done in Ellicott City."

Others say they would prefer to promote the town on modest terms. "I, for one, would be very disappointed if Ellicott City were taken over by big chains and stopped being a place where a first-timer could try her hands at starting a business," Bright said.

"Because it was built by Quakers for working-class people, Ellicott City looks very plain," added Bounds. "A lot of its charm isn't immediately obvious to a first-time visitor. It's the kind of place that grows on you."