It's just past dusk and the crowds are getting bigger at Huashan 1914 Creative Park, a distillery-turned-arts-hub in the heart of Taiwan's capital.

Couples drift out of an exhibition of Pulitzer Prize-winning photography, while families gather at Alleycat's Pizza. In Café Lumière, named after a 2003 film by Hou Hsiao-hsien, students order cappuccinos before heading over to the adjoining art-house cinema.

The compound's spacious lawn is filled with city dwellers enjoying the warm evening with their four-legged friends. "A lot of the times, there are more dogs than people," Lee Chang-Fang, the director of Huashan 1914, told me with a smile.

In most major Asian cities, this scene wouldn't be taking place. A well-connected developer would have snapped up the 7-hectare parcel of land that makes up Huashan, valued at $1 billion, and erected a mall or condominium block.

Welcome to the new Taipei. Other Asian cities might compete on building the flashiest skyscrapers or glitziest shopping center. But the Taiwanese capital, once a typical '80s Asian Tiger boomtown, is forging a different path.

Since the late 1990s, the municipal government has focused on improving the quality of life in this city of 2.6 million. "Taipei is a city known for its friendliness and rapid development of technology," Mayor Hau Lung-pin said in 2010 during the launch of a beautification campaign. "We want to turn it into a beautiful city."

"Everyone knows that Taipei is a city with a good lifestyle, but that's not enough," Lin Chong-jie, the director of Taipei's Urban Redevelopment Office, said. "We want to make Taipei's place in Asia clearer, and one of the ways of doing so is becoming a creative city."

These days, in place of the go-getting attitudes of Beijing, Seoul and Hong Kong is an embrace of a relatively modest lifestyle, where nature, a decent croissant and rare vinyl increasingly trumps having the latest Rolex. Drop by the 24-hour flagship store of Eslite, Taiwan's largest bookstore, and you'll see guidebooks to the city's slower side: tucked-away teahouses and shops selling hand-stitched books.

THE SIMPLE LIFE: A couple takes a breather at 44 South Village, a former housing estate remade into a public space. Sean Marc Lee for The Wall Street Journal

"Simple" and "slow" are the new marketing buzzwords. At 44 South Village, a former housing estate for military families in the Xinyi District that's been rehabilitated into a public space, a farmer's market called Simple Market is held every Sunday. Last December, lines snaked around Huashan when tickets for Urban Simple Life, the park's biannual music-design-food festival, went on sale.

Huashan embodies this new ethos. Its transformation, however, took nearly two decades, and in some ways, reflects Taiwan's maturation as a democracy. Built by Japanese colonialists in 1914, the distillery, one of the island's largest, produced sake and plum wine until its closure in 1987. For a decade, it lay fallow as officials tussled over its fate.

In the late 1990s, an avant-garde theater troupe began staging underground performances at the site. Attempts to evict them by officials were met with resistance by artists and their supporters, leading to a public battle over Huashan's fate. "In Taiwan, things are open to debate—what the government says isn't what necessarily goes," Mr. Lee said. Eventually, the distillery was designated as a cultural district in 1999.

Handed over to the privately run Taiwan Cultural-Creative Development Co., Huashan reopened in 2007 and has been gathering steam since. Further burnishing its credentials, this past November saw the opening of Spot, a NT$90 million cinema run by the government-backed Taiwan Film and Culture Association, where Mr. Hou serves as an honorary chairman.

This isn't the city I grew up with. As a child of Chinese parents living in the U.S., I found visits to Taipei only made America's clean, green streets more appealing. But that has changed. Since moving to Asia nearly 14 years ago, obligatory family visits to a gritty city have turned into voluntary trips to a place where I can count on a relaxing weekend spent browsing bookstores and eating good food.

I'm not the only one who has fallen for Taipei's newfound appeal: Last year, British consulting firm ECA International ranked it sixth among Asia's most livable cities, ahead of Seoul and Kuala Lumpur.

The drive to improve public transportation, clean up the air and increase green space has played an essential role. Rising incomes are also a factor; the city's middle class is deeply entrenched. But they alone don't explain the proliferation of cafes serving single-origin coffee or the indie-minded designers selling their wares at stores such as Good Cho's in 44 South Village and Huashan's 1914 Connections. How did Taipei become Asia's answer to Portland, Oregon?

I posed this question to Kung Shu-Chang, who heads the graduate school of architecture at National Chiao-Tung University. An affable man with salt-and-pepper hair and an idealistic streak, he cited everything from the rearranging of priorities amid a slowing economy to the evolution of a Taiwanese identity.

Opening his laptop, he pulled up an illustration by Monocle magazine of the perfect city block and pointed out how similar it was to a typical Taipei one, with storefronts facing the street and residences and parks tucked inside. The city's concrete jumble is far less pretty than the utopia on his screen, but it has the same village-like feel. "The government wanted to have a beautification campaign, but it's too late for that," said Mr. Kung. "That's not what this city is about."

He and other like-minded architects and urban planners prefer another approach. Under the auspices of the government-sponsored Urban Regeneration Station project, derelict warehouses and factories are being converted into creative hubs for up-and-coming artists and designers. Mr. Kung and I talked in the airy, all-white Museum of Tomorrow cafe of URS 21 Chung Shan Creative Hub, a former tobacco warehouse that now houses a gallery and affordable studios for young fashion designers.

Of course, artists and other creative types aren't the only ones behind Taipei's makeover. Occupying a former factory in Huashan is VVG Thinking, the latest venture by Grace Wang, an interior designer behind a mini-empire of shabby-chic cafes and boutiques. The day I met her, a fashion shoot was taking place downstairs in the restaurant.

"I think there's a desire to create a deeper culture here," Ms. Wang said. After our chat, she led me on a tour of the shop, pointing out the work of young designers as well as veteran artisans. It's a mix of odds and ends—a high-end flea market with books piled on antique-looking tables, retro windup toys and hand-carved wooden kitchen utensils from Japan.

But throughout my trip, I can't help but wonder whether there's a whiff of resignation in this new artsy-craftsy, laid-back Taipei. It's no secret that if you're young, talented and driven, you're better off launching your career in Shanghai or Beijing. A generation selling homemade jams, handcrafted cards and tongue-in-cheek furniture isn't likely to come up with a company to compete with Samsung.

"Taiwan is becoming like a retirement home," said Mr. Kung, repeating a line I had heard others say—sometimes in boast of the island's quality of life, sometimes in derision. Ms. Wang, however, sees things differently. "Taipei is becoming more and more interesting," she said. "We're still hardworking and we have hope, and as long as there's hope, then we have a future to look forward to."