In 1979, architecture critic Paul Goldberger wrote that Union Square “can accommodate flamboyant showoffs and it can accommodate derelicts, but not genteel matrons.”

The vibrancy of earlier decades, he wrote, had died down, leaving a “dreary park” and a surrounding area that was “tawdry with no particular charm.”

Today, the area’s bustling streetscape, thriving retail and residential real estate market, popular restaurant scene, and animated park environment are evidence of New York’s ongoing regeneration.

A professor of urban planning at nearby New York University, Mitchell Moss, said Union Square has “now become the epicenter of the city’s energy.”

In the last decade, Mr. Moss said, the area has absorbed some of the diversity and creativity of the surrounding neighborhoods, including Greenwich Village to the south, and some of the city’s younger areas, such as Williamsburg and the meatpacking district, each connected to Union Square by the L train.

“The southern part of the square has become the equivalent of the Spanish Steps in Rome, where people just gather together,” Mr. Moss said. “There is no better place for people-watching.”

The chairman of Prudential Douglas Elliman’s retail division, Faith Hope Consolo, said rents around Union Square have tripled in a little over a year. Storefronts that used to rent for about $100 a square foot are now going for $250 to $300 a square foot, comparable to parts of Midtown and SoHo, she said.

“It’s like spandex now. The area is moving a couple of blocks west, a couple of blocks east, and down Broadway,” Ms. Consolo said. “There is incredible foot traffic, so people are open there until midnight. It’s every age and every economic group. The icing on the cake are the tourists.”

Real estate analysts say one of the pioneers of the area’s revitalization was developer William Zeckendorf Jr. His son, Arthur, also a developer, said Union Square’s great access to transportation and central location had tempted his father to build there as early as the mid-1970s.

“But it was run down, the park was derelict and full of drug dealers. It was a dangerous location,” Arthur Zeckendorf said. “With the existing zoning, you couldn’t really build an economical building.”

A 1984 report by the city’s department of planning describes how crime, drugs, a high vacancy rate, and underutilized development sites led to the area’s decline.

The Planning Commission upzoned the area in the mid-1980s, and in 1987 Mr. Zeckendorf built four towers with 600 luxury condominiums on the site of a former department store that had sat vacant for 10 years on the southeastern part of the square. Within 18 months, Arthur Zeckendorf said, they were sold out.

Other important turning points include the conversion of the landmarked Guardian Life Insurance Building into the trendy W Hotel in 2000, and restaurateur Danny Meyer’s success at turning the square into a culinary destination, beginning with his flagship, the Union Square Café, which opened in 1985. Mr. Meyer is now a chairman of the square’s business improvement organization.

The area has since attracted some of the city’s biggest developers, including the Related Companies, which manages One Union Square South, a luxury rental building that contains a Virgin Megastore and a Circuit City. Vornado Realty Trust controls 4 Union Square South, a retail complex that contains Whole Foods, Filene’s Basement, Forever 21, and Jamba Juice.

The southern plaza of Union Square Park, along 14th Street, underwent a $6.3 million reconstruction in 2002, and a renovation of the northern end of the park is in the works.

Real estate analysts said there is a lack of developable sites surrounding the square, but that the area could expect an increasing amount of conversions to residential from office space.

In one of the last developable lots on the south side of Union Square, a 15-story luxury condominium, 8 Union Square South, is now rising at the corner of University and 14th streets. The site was formerly home to a low-rise building designed by Morris Lapidus that contained a discount store. Preservationists failed in an effort to preserve the building last year.

The marketing agent for the condominium project, Michael Shvo, said Union Square’s evolution, which began with the Zeckendorf Towers, has been advanced by the popularity of the farmer’s market and the arrival of Whole Foods and major retail brands, transforming the area into “a lifestyle destination.”

“This next phase of evolution for Union Square will involve new residential projects, but also continued rethinking and revitalization of the area’s retail businesses,” Mr. Shvo said.

“We’ve seen a lot of young, design-savvy couples who want to start families visit the sales office,” Mr. Shvo said. “We’ve also seen buyers who at one point lived in the area, don’t now, and want to return to Union Square.”

The executive director of the Greenwich Village Society for Historic Preservation, Andrew Berman, said the transformation makes the area almost “unrecognizable” to its former self.

Much of that, he said, comes from an influx of students. New York University built two dormitories near the square, and several other universities share the neighborhood, including campuses of the Parsons School of Design, Baruch, the New School, and the School of Visual Arts.

“It is clearly becoming chicer and trendier probably than it ever was,” Mr. Berman said. “Union Square has become what Washington Square was 20 years ago.”

An architect and a board member of the Union Square Community Coalition, Leo Blackman, said the area’s rebirth is commendable, but it is taking a toll on the neighborhood, particularly the park.

“The demand on that little piece of green has really doubled,” Mr. Blackman said. “The park is absorbing more people with more commercial activity on the southern edge.”

Mr. Blackman described a growing tension between the community group he serves and the area’s business improvement organization.

“From a business point of view, you want to jam people in the park,” Mr. Blackman said. “At a certain point it becomes unpleasant and less of a resource for people who live in the neighborhood.”