Steeped in history, tinged with bourbon and surrounded by the horse farms that define its identity, this northern-Kentucky city could have ridden into the 21st century on the strength of its past, or sold off its heritage, lot by lot and farm by farm, for the sake of development. Instead, Lexington has worked hard, and sometimes contentiously, to protect its green pastures, brick-and-limestone buildings and small-town feel while cultivating a burgeoning downtown and an economy that includes health care, high-tech, higher education and, yes, horses.

VIDEO: Take a virtual walking tour of Lexington.

The diversified job market has allowed Lexington to survive bad times and move forward in good. The University of Kentucky, the city’s largest employer, recently opened a major new wing to its hospital, fueling the already-thriving health sector; other big employers include Lexmark and Toyota. Thanks to a commercial development department at the University of Kentucky and a network of investors, Lexington also provides fertile ground for start-ups. “Our brand is in preserving our roots and confirming our potential,” says Mayor Jim Gray. “There’s a lot of room for expression and growth here.”

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Intellectual growth, that is. Lexington manages physical growth by limiting development to its urban district and requiring that rural lots be no fewer than 40 acres each. A separate regional program purchases pastureland to protect it. The result: “You can leave from the middle of town and within 20 minutes, you’re in some of the most beautiful countryside in America,” says Bill Lear, a Lexington real estate attorney and developer.