The crowd begins filling the courtyard of Opaline, a trendy new restaurant, as late evening teeters toward early morning. Many arrive by golf cart, whisked through dim alleys to the wooden doors of a centuries-old Arab home within the walls of the Old City.

Opaline opened inside the carefully restored house two months ago with a glittering inauguration featured in the pages of Our Nights Out, Syria's answer to Vanity Fair. On a Thursday night, as a Cuban band plays salsa in one corner, revelers dine under elaborately painted cedar ceilings and dance near a courtyard fountain covered in floating lilies. But Basma Hiraki, a chic 33-year-old celebrating her birthday with a dozen friends, says she chose the restaurant more for its sense of history than for its hipness.

"This is something new, even though it is thousands of years old," said Hiraki, an immigration consultant. "In Arabic, we say that a person who has lost his roots must look for them. These are our roots."

The gentrification of a 3,000-year-old neighborhood is underway in one of the world's oldest inhabited cities, sending property values along ancient alleys soaring and turning a crumbling walled enclave into the most glamorous nightspot in the capital. Unlike other restoration projects driven by international organizations or tourism, the rejuvenation of Old Damascus is being done almost entirely by Syrians for Syrians, at great expense and with painstaking attention to historical detail.

Within rough Roman walls, more than 35 restaurants have opened in centuries-old Damascus homes over the past few years. More than 60 others, many of them badly damaged by time and the elements, are being restored for private or commercial use. Artists have opened studios in airy old houses, allowing the public to wander in and watch sculptures take shape. At the same time, gold merchants, sword smiths, perfume makers and spice vendors have remained part of the landscape, maintaining the cultural authenticity that the Syrians now moving inside the walls are searching for.

The renovation is being driven by a generation whose parents fled the tight quarters, poor public services and uneven alleys of the Old City decades ago for comfortable Western-style suburbs. Homes, battered by time and costly to maintain, were sold for a pittance. Many were filled with poor families seeking shelter. Now those homes are fetching hundreds of thousands of dollars, and their renovation often runs to twice that amount.

The trend is a sign of a rising private sector in a country where more than half the economy is controlled by the state. It also reflects an urgent desire to return to a place neglected for decades.

"Every year that we wait, it's like we've lost 10," said Thala Khair, 30, who is renovating a home in the Muslim Quarter. "Every Syrian comes down here to the souks every once in a while, and anyone who can help save it should start immediately."

The daughter of an oil engineer who frequently brought his family for strolls through the souks, or markets, Khair has lived most of her life in the city's suburbs. She is the successful owner of a private elementary school, and last year she paid roughly $500,000 for a renowned if dilapidated home near the Omayyad Mosque in the heart of the Old City.

The house at the end of a tiny alley off Al-Sawaff Street once belonged to a wealthy family of traders from Baghdad, and its former glory is evident in the mother-of-pearl inlay above arched doors, the filigreed woodwork and the lavishly painted walls and ceilings in the salons. The call of the muezzin at the Omayyad Mosque, its minaret visible above the roofline, has floated over the leafy courtyard for centuries.

But the owners abandoned the house in the 1950s, and seven families moved into its elegant rooms. They built walls and stairways, dividing the grounds among them. Today the woodwork is crumbling, plaster covers many of the 18th-century murals and chunks of carved stone have fallen into the courtyard.

"In the beginning, people looked at me and said, 'You are crazy. What are you thinking?' " Khair said. "Even my mother."

The project will take at least five years, and the first stage is to strip the house to its core. As work crews peel off plaster, tear out cement staircases and gather original stones and carved wood from the rubble, the original home is beginning to show through.

"This house was built down to the tiniest details, with nothing out of place," said Bassel Zurayk, the architect managing the project, who has done half a dozen smaller renovations and is now turning work away. "People here have tried the new architecture, and now they've woken up to the beauty of this."

Khair plans to spend nearly $1 million restoring the home. But as a mother of four children, she intends to keep her apartment in the suburbs, spending summers in the Old City and the rest of the time in a place where a school bus can pull up to her door.

"Now all of my friends are looking for places," Khair said.

Old Damascus was an important trading hub on the Silk Road between the Far East and Europe. At its peak, 100,000 people of various professions, tribes and faiths lived inside its walls. The vast Omayyad Mosque, once shared by Christians and Muslims, rests on the remains of a 3rd-century Roman temple, which itself sits on the ruins of an Aramaic temple built 1,000 years earlier. Tradition holds that after his blinding conversion on the road to Damascus, Saint Paul recovered his sight in a stone hut on Hanania Street.

But almost half the population deserted the Old City in the 1950s, leaving the current population of about 50,000 people, most of them poor. The uneven alleys are a testament to the haphazard change over the years. Earthquake rubble became the foundation for new homes, some now perched on 15 feet of debris accumulated over centuries.

The restoration today is being managed more efficiently by an earnest engineer who sits behind a huge, carved-wood desk off an alley draped with vines. Ali Mubaiyed was born in the Old City, and now he is the busy director of planning and administration for Old Damascus.

Mubaiyed said that more than 60 private homes, representing 10 percent of Old Damascus, are being renovated. The number of new applications is spiking, he said, and almost all are from young Syrians.

"It is mainly a result of having traveled abroad, seeing how other people are attached to their cultural heritage and returning with those feelings," Mubaiyed said. "This idea that they are inheritors of one of the world's oldest cities is striking their imagination."

But Mubaiyed said he faces many challenges in trying to ensure that the renovation is not only historically accurate, but preserves the livelihoods of the merchants who still sell herbal remedies, baskets of roasted cashews and pistachios, custom-made swords and Rolex watches. As prices rise, so does the pressure for them to sell their homes.

"We don't want this to become a phantom city -- one that lives at night and dies during the day," Mubaiyed said. "More important even than the restoration is making sure we preserve the demographics, making sure it stays alive."

Samer Kozah, an art dealer, never left the home on Taleh Fudda Street in the Christian Quarter where he was born 46 years ago. His grandfather and father, a goldsmith, were born there too. Kozah has spent $80,000 transforming the place into an art gallery and studio, carefully restoring wooden balconies, buckling ceilings and stone carvings that grace the doorways.

In the 1950s, he said, all but five of the 30 families who lived in his neighborhood left for the suburbs. Many are coming back, and their return is driving up property values. Over the past three years, the value of his house has increased from $160,000 to $250,000, as a number of nearby homes have been sold for renovation.

"You always find a surprise when you start," said Kozah, who has $20,000 worth of work left. "But I like what I have done. It is exactly as my father had it."

Soon, Old Damascus will face fresh competition from modernity. A Planet Hollywood restaurant is scheduled to open outside the walls in the next year, alongside a new Four Seasons Hotel. The columned facade of the Hijaz Railway Station, dating to the late 19th century, will soon become the entrance to a shopping mall that covers an entire city block just outside the Old City. To the patrons of Opaline, however, the new glitz holds little appeal.

"Our modern suburbs are dull and faded copies of what Europe and America have to offer," said Farouk Ayyash, the former director of the Commercial Bank of Syria, as he puffed on a Cuban Montecristo cigar. "When we come down here, it's authentic, original, not a copy of anyplace else in the world."

The Omayyad Mosque rises in the background of Old Damascus. It is one of the world's oldest inhabited cities and was a major trading hub.At first, said Thala Khair, 30, one of many young Syrians moving back into the Old City, people asked, "What are you thinking?" The Omayyad Mosque, once shared by Christians and Muslims, rests on the remains of a 3rd-century Roman temple, which sits on earlier ruins.Boys play in one of the Old City's scores of narrow alleys. Renovation is being done almost wholly by Syrians for Syrians.