Vatican city daily, L'Osservatore, may have a small circulation, but it is hitting the headlines in its own right. So what really goes on in the offices of the pope's in-house paper?

Newspapers around the world may be suffering, but at least one very small one is making a big impression. L'Osservatore Romano, the Vatican daily paper, sells only 12,000 copies. Even taking account of its six weekly and one monthly edition in languages other than Italian, the total circulation is less than 100,000.

And yet in recent months it has developed a knack of getting itself into other newspapers and media. This week, it hit the spotlight again with a review of a book on Oscar Wilde that argued he was "one of the personalities of the 19th century who most lucidly analysed the modern world". Published in any other paper, it would have passed unnoticed. But coming from the pope's house organ, it was hailed as a sign that the Vatican had forgiven Victorian England's most scandalous gay writer (though, in fact, Wilde was received into the Catholic church on his death bed).

For a paper with such visibility, L'Osservatore could scarcely be harder to reach. Anyone who tries to enter the Vatican soon finds their way blocked by a Swiss Guard. But, at one of the side entrances, the Porta Sant'Anna to the north of St Peter's, if you have accreditation or a letter of authorisation, the guards in their florid Renaissance uniforms will wave you through. Take the first street on the right and follow it to the end, and you will end up in front of a nondescript building of the sort that is disappointingly characteristic of much of the "secret city".

There, on the first floor, is the office of the bearded and bespectacled academic who is responsible for much of the fuss. Gian Maria Vian, a 57-year-old former teacher of patristic philology, was put into the editorship of L'Osservatore Romano by the pope in 2007, and has since proved to have a flair for controversy that would do credit to Max Clifford.

"This is a very special newspaper, which has enormous responsibilities because it is the newspaper of the pope," he says. "But at the same time it has to try to be normal."

That is the big change. Until two years ago, L'Osservatore was anything but normal. Its relationship to the Vatican was like that of Pravda to the Soviet-era Kremlin. There were two sorts of articles: those in which a Vatican department had directly intervened (signalled to the knowledgeable by three discreet asterisks), and those that had been written by L'Osservatore's staff, but with such care not to embarrass or offend that, with rare exceptions, they were stiflingly boring.

"When I took over the paper", says Vian, "the pope wrote me a letter in which he said that L'Osservatore had to be present in the cultural debate." Now that may not sound to you or me like an explicit remit to jazz it up. But Vian, who is perfectly attuned to the subtleties of Vatican communication (his father was the chief librarian), is certain it was.

Just like Rupert Murdoch outlining his demands to a new editor of the Times, Benedict had a list of things he wanted to see in the revamped paper: "The pope asked me for more international coverage, more attention to the Christian East, and more space for women."

Really?

"Yes, get more women writing and devote more attention to women's issues."

So, like any editor keen to keep the proprietor happy, Vian hired L'Osservatore's first-ever female staffer. The daily and its various offshoots have a tiny complement of only 25 journalists, and a total staff of less than 100.

Not the least interesting aspect of the changes that have swept through this tiny media outcrop is that they offer a quite different view of a pope generally regarded as ultra-conservative and a bit other-worldly. Vian insists this is a caricature and that, insofar as the media is concerned, Benedict has a firm grasp of the processes involved. "When the deputy editor and I were invited to see the pope to talk a bit about the paper three weeks after we were appointed, he gave us to understand that he'd like to see a few more pictures in it."

Vian made it a rule to use colour photographs every day on the front and back as part of a redesign that he says has turned L'Osservatore into "one of the most elegant of European newspapers". But the really important difference is the content. The paper's international coverage is still closely monitored by the Vatican's secretariat of state (though Vian says its desk officers "do not go through every line"), but the cryptic asterisks have disappeared.

The new editor has freed his contributors to write about a much wider range of topics, and allowed them to express views that are not necessarily those of the Vatican, let alone Benedict XVI, but which catch the attention of outsiders all the same. (When Britain's ambassador to the Holy See, Francis Campbell, suggested to Vian that the prime minister might write a piece for the paper ahead of his visit to see the pope, he leapt at the idea, even though nothing like it had been done since L'Osservatore was founded in 1861.)

Much as the editor welcomes the publicity, however, he says that a lot of it is generated by a fundamental misunderstanding. "This is not an official newspaper." Referring to another recent article that made waves, he explains: "When we publish an article on Michael Jackson and say that he was an important phenomenon, that does not mean the pope is giving him his blessing."

Some readers, though, would argue it does – or, at least, that it should. In its former, dryer guise, if L'Osservatore liked or hated or took something into consideration, then it was a fair bet his holiness did too. And now? Vian is almost impossible to pin down. The paper may not be "official", but he concedes that it "represents an authoritative point of view". L'Osservatore is a "newspaper of its environment that is conditioned by that environment".

One theory among those who monitor the Vatican is that this ambiguity is actually quite useful to the pope and his advisers, because it can say things they may not believe but do not mind being said. Vian says that the most heated controversy of his editorship so far arose over an editorial that he published ahead of President Obama's visit to see Benedict earlier this month. Conservative Catholics in the US and elsewhere were appalled to see that, despite the new president's moves on abortion and stem-cell research, the Vatican's daily took a positive view of his first 100 days. There were calls for Vian to resign. One Italian commentator branded him a pro-abortionist, and some in the US concluded he was a maverick liberal whose views ought not to be taken seriously.

In fact, Vian's approach may have been closer to the pope's than they thought. The Vatican's agenda stretches far beyond the pro-life/pro-choice battle and in many other areas, such as social justice, disarmament, the Middle East and Cuba, the US's new Democratic administration is more in tune with its thinking than the previous Republican one. Certainly, the editorial cleared the way for a cordial visit and what one insider described as the most substantive recent conversations held between a pope and a US president.

Clearly, Vian is still taken aback by the ferocity of that row, but reasons that "It's a sign of interest. It shows that we count." And, he says, while the controversies that have surrounded his editorship have not increased L'Osservatore's circulation, "I consider that to be a success in the context of an Italian press which is suffering a truly dreadful crisis."

In any case, as he quipped in an interview with the conservative US magazine National Review, "It's my publisher, the owner, who is infallible, not me" .