Scott Budzynski is passionate about Berlin. “It’s not every day you see a capital being rebuilt before your eyes,” he says. One of the guides for Insider walking tours, Mr Budzynski is affable and laid-back but still sets a cracking pace that doesn’t let our small group get cold as he leads us for more than four hours to all the places we’ve heard of and many more besides.

I’d prepared myself by spending the morning at The Story of Berlin, a privately run interactive exhibition spread over three floors off Kurfuerstendamm, which made me feel as if I was in the middle of some of the most important moments in the history of the city. In one room, you can hear the crackle of burning books and the shouts and shattering of glass of Kristallnacht, the November night in 1938 when Nazis attacked Jewish shops and homes; in another the gentle music of a middle-class soiree in the 19th century; in a third you can see a reconstruction of an early 20th-century tenement courtyard and overhear the conversations and laughter of the residents.

Starting in the middle ages, the exhibition imaginatively explores some of the difficult issues Berliners are still learning to deal with, not least the post-war carve-up of their city. It ends joyously with a huge bank of screens showing the world’s reaction to the moment in 1989 when the Berlin Wall began to be pulled down by the people and families it had divided for 28 years. From newscasters all over the world, in many languages, you can hear and see the pivotal event of recent German history.

But before you emerge smiling into the glittering shopping streets, a sinister relic of the Cold War waits to be inspected. Below the exhibition is a fall-out shelter, designed to keep the first 3,692 people who got through the door alive for just 14 days in the event of nuclear attack. And it’s still operational.

So it was a relief to get out into the sparkling air with Mr Budzynski and see what’s left of old Berlin and some of the amazing architecture that’s being constructed to fit out the city for its reclaimed role as capital of a united Germany. An art historian by training, New Yorker Mr Budzynski shares his personal enthusiasms about his adopted city, such as artists’ graffiti and the newest buildings, without neglecting the important sights: the new Reichstag dome, the Brandenburg Gate and the Hotel Adlon by Checkpoint Charlie as well as the Topography of Terror (www.topographie.de), the sites where Nazi extermination policies were planned and opponents of the regime were tortured and executed. Now it’s one of the few places in central Berlin where you can see parts of the wall as it used to stand - still deadly as it’s full of asbestos.

Tiny pieces of the wall are on sale at the museum at Checkpoint Charlie, although the many stalls nearby offer better value and the stall holders are not as rude as the guardians of the privately run museum. It costs nothing to have your picture taken by the sandbags under the iconic sign stating: “You are leaving the American sector” in four languages.

Fascinating as Mr Budzynski has been, for our discussion has ranged widely over history and politics, I’m delighted to get back to my hostel, Generator Berlin, and flop on to the thick, white sheets of my narrow bed for a siesta. In a converted office block in the former Eastern sector, Generator provides a variety of good-value accommodation, ranging from twin rooms to large dormitories, all brightly painted in pop art blue, green and white. Refreshed by a shower in my tiny private bathroom pod, I seek out dinner in the buzzing district of Hackescher Markt. Returning late to Generator, I find the industrial steel, blue-neon-lit bar in full party mode and join in until closing time at 2am.

Next morning, the same bar is unrecognisable as the sun floods in over hostellers taking breakfast. I decide to return to ransack the funky little shops of Hackescher Markt for souvenirs, and find the perfect present: red and green jelly babies in the shape of the Ampelmann (www.ampelmann.de), the illuminated walking man that told residents of the former East Germany, or “Ossies”, when to cross the road.

More Berlin information: www.berlin-tourist-information.com. The Story of Berlin, e9.30 (tel: 00 49 30 887 20 100; www.story-of-berlin.de). Insider Classic Walking Tour, e12 (tel: 00 49 30 69 23 149; www.insidertour.com).

Generator Berlin, Storkower Strasse 160, D-10407 Berlin (tel: 00 49 30 41 240 11; www.generatorhostels. com). Dorm beds from e14, singles from e28, twins from e21 - all per person, per night, including basic continental breakfast, bed-linen and large towel. Air Berlin flies from Stansted to Berlin-Tegel twice a day, from pound;19 one way, including taxes and complimentary snacks and drinks. Seats assigned at check-in. Tel: 0870 738 88 80; www.airberlin.com. A useful pocket-sized guide is Berlin by Neil Taylor and Nina Hamilton, pound;7.95 in the Footprint series: www.footprintbooks.com