Given that Braga has almost four dozen places of worship, it's easy to see why the Baroque city, one of Portugal's oldest, has a reputation as a staid, ecclesiastical destination. Each Easter, pious throngs flock here for the city's Semana Santa, and most visitors who end up in a place that barely registers on the global radar are here to tour the churches on a day trip from Porto, an hour away.

I made the journey because I was intrigued to discover why this ancient city – a former stronghold of the Roman empire – was selected as the 2012 European Capital of Youth. Clearly something was going on beyond the obvious. And it wasn't long before I realised that there is another side to this unassuming city in the country's northiwest corner.

Thanks to a large student population and a steady influx of young Portuguese, Braga has some lively cultural offerings, an eclectic vibe, a mellow – mostly underground – bar scene, and the bonus of outdoor adventure on the doorstep thanks to its close proximity to Peneda-Gerês national park.

The small-town warmth of the place is immediately apparent at the Braga Pop Hostel (dorms from €18, doubles from €42) where owner Helena Gomes likes her guests to feel like friends rather than tourists. Her idiosyncratic touches start with a wink in the form of a sign on the second floor stairwell bearing the words: "We're sorry... but you still have one more floor to climb", and on the third-floor: "Hard stairs, aren't they? But, on the other hand, you're welcome."

Morning at the Cathedral in Braga. Photograph: Alamy

With its boldly hued interior and warm atmosphere, this place is as dynamic as hostels come. "We want everyone to be relaxed and in a good mood," says Helena, who acts as the hostel's concierge, interior designer and art curator. She has added whimsical chairs bearing monster faces, crocheted lamp covers, and hand-painted breakfast bowls.

One private room is available for anyone not a fan of bunk beds, although the common areas – a lounge decorated with works from young artists and a sunny terrace with small murals that guests are encouraged to sketch – foster a spirit of conviviality. Helena sometimes leads walks to nearby cafes and invites guests out to concerts. She also rents out bicycles for tootling around town.

I declined the bike in favour of a leisurely stroll along the cobbled streets and atmospheric squares of Braga's pedestrian-friendly city centre. University students throng the outdoor cafes and wine bars, and some of the grand, old buildings have become repositories for modern art or architecture.

There's contemporary photography in the Museu da Imagem, which spans two historic buildings: one from the 19th century and a tower from the 14th that was part of the original city wall, and innovative design at the Chapel Tree of Life (open to the public Fridays at 5pm) within the centuries-old seminary of São Pedro and São Paulo. This slatted structure, constructed solely of wood (with no nails or hinges), is suffused with light and evokes the serenity of the nearby forests while providing a singular example of the power of modern architecture.

Braga Pop Hostel

Another hub of art and cultural activities is Livraria Centésima Página (centesima.com), a popular bookshop behind an 18th-century facade, with a lush garden that seems to have attracted most of the pushchair-wielding mothers of the city. Like many venues in Braga, it multi-tasks – as a coffee bar, exhibition space, workshop and art gallery. I'd expected to hear readings from authors but not to be able to fill my bags with Portuguese wines, jams and other gourmet goodies.

In fact, it was hard to keep my focus on Braga's cultural offerings when my taste buds were constantly being tempted. A lovely old mansion with iron and stone balconies is home to Spirito, a popular cafe serving Oreo and Guylian chocolate cupcakes on an outdoor patio strewn with oversized lamps, comfy day beds, couches and throw pillows.

The lingering clientele are mostly young, but there are some perky over-4os sipping icy mango-passionfruit frappés, though they are all missing out on the main event. "People go mad for our gelato," says co-owner Nuno Freitas. "Recently a group of Americans and Canadians ordered 34 ounces of ice-cream daily."

Centésima Página

Braga's noticeably unhurried pace of life accelerates after dark, especially in the downtown area. The city's sense of intimacy and compact size make it easy to bar hop – and it offers a more inviting prospect than trying to negotiate Porto's vast urban sprawl.

Even here, among the modish Braga haunts, history is everywhere. At Restaurante Brac, you can sip crafted cocktails beneath contemporary paintings with a view of medieval ruins. The menu focuses on classic Portuguese ingredients, but nudges them into the 21st century with dishes such as octopus carpaccio with olive-caper vinaigrette.

A 10-minute stroll away, Quatorze transforms from a daytime, by-appointment art gallery into a night-time bar and music venue, often with themed events fusing music, food and film from a specific destination. In many towns this would be the preserve of the millenials but here people of all ages, from twentysomethings to over-50s, mingle easily. Like many university towns, Braga has a creative energy that that brings together all sorts of people, transcending age, class and lifestyle. Rather than being stuck in the past, it continues to adapt and thrive, looking to the future with a new-found sense of optimism.