Like a prize-winning tulip, Amsterdam's canals have been carefully cultivated. The voluptuous curves of the river and the shape of the land between, reminiscent of floating petals, is artificial.

More than 100 kilometers of canals run through the city, first built in 1613 when it was just a cluster on the soggy marshland of the River Amsel, still the only natural river in the city. As the population grew, another ring of canals appeared. The water was the city's main means of transportation for fuel, food and goods to waterside dwellers. Now it comprises more than 90 islands, reached by 1,500 bridges.

Amsterdam has a rigorous system of upkeep for the river banks, so only the wildly rich can afford to keep their canal houses in the mint condition required by the authorities.

The result is a coveted place for the canals on the UNESCO World Heritage List, and the canal district is Amsterdam's most desirable real estate. Riverside loft apartments go for more than half a million Euros.

The beautiful sloping buildings, with their dark wooden beams lean woozily forward. They stand tall, stretched like dough to accommodate their owners – the Dutch being reputedly the tallest in Europe.

Despite meticulous maintenance, Amsterdam is still precariously positioned. Dutch Renaissance theologian Erasmus described the city as a place where the people "lived on the tops of trees", referring to the sturdy wooden poles the houses are built on, that sink deep into the muddy marshland to keep the city from sliding into the sea.

Many buildings are now private banks and corporate property. In April, Het Grachtenhaus, a museum in an old canal house on Herengracht, will host the city's first interactive exhibition on nearly four centuries of canals.

The house, a former private bank which cost €6m to buy and another €3m to restore, was built in 1660 by Philips Vingbooms in the style of Louis XIV's Versailles. Its most beautiful room, with intricate murals between dark wood panels, played a vital part in America's history. Known as the "funding house of America's independence". This is where John Adams met the bank managers and secured a loan to keep fighting the war of independence.

But the museum's curators hope it will serve as a practical base for tourists, who can print personalised maps to plan tours of the canals and book means of transport.

Amsterdam is a pocket-sized city and most sites are within walking distance of each other. Bikes, the preferred Dutch method of transport, are easy to hire.

It can rain in Amsterdam as many as 200 days a year. To escape the cold or rain and hordes of tourists, make a pit stop in a smoky, canal-side "brown bar" so-called because of the tobacco-stained walls. Settle down for a lazy tankard of Heineken, or a warm bowl of soup.

There's a reliable tram system but experience the beauty of Amsterdam's waterways, the water is the best way to travel. On the rare occasions the canals freeze solid, locals don skates and zoom all the way down the Prinsengracht.

On warmer days, daring tourists can take out a picnic in a pedalo, although it can feel a bit like trying to go down the M1 in a golf buggy.

Canal cruises can be organised by many of the hotels, to take in almost all of the famous sites of the city. The tourist office offers themed tours such as pancake breakfast cruises, gourmet restaurant cruises and themed boats. Canal Company offer "cruise and comedy" tours and private, romantic canal trips for two.

Many cruises are designed for simply snuggling in a sheepskin blanket and watching the pretty lights of Amsterdam's bridges, gawping at the merchant's mansions and looking at the canals 3000 houseboats. But cruises can be a great sightseeing tool too. Most of the cultural and historical sights are on the banks of the canals – including the infamous red light district.

Canal buses, costing around €20 for 24 hours, offer a hop-on, hop-off service. The water bus routes show off the city's art and architecture, from the Rijksmuseum, the Van Gogh museum, the Hermitage and Rembrandt's house, where the painter lived until going bankrupt and auctioning all his belongs in 1656.

Amsterdam's canals are rich in Jewish history; the Anne Frank House is on the banks of Prinsengracht canal and one of the stops of the canal bus. The tiny attic rooms, often crammed with tourists, have lost none of their poignancy and downstairs new exhibitions invite visitors to consider Anne's legacy in a modern context. Further into the city centre is the Portuguese-Israeli synagogue, a colossal and beautiful building, open to the public and dating back to 1675.

Away from the department stores around the central Dam Square, discerning shoppers should seek out the canal-side district of Nine Streets, close to the Anne Frank House and canal bus stop. Independent fashion boutiques, elegant furniture, jewelers and chocolate box apothecaries can be found. in its tiny, weaving streets, connected by spindly bridges.

Close by is Envy, one of the city's most delicious places to eat - specialising in deli-style platters of fish, bread and vegetables.

Fish-lovers should also seek out Bridges at Hotel Amsterdam The Grand and Japanese haute-cuisine at Yamazato at the Hotel Okura, where Japanese cookery lessons with the restaurant's Michelin-starred chefs are on offer.

Amsterdam is rich in fine canal-side hotels. One of the most beautiful boutique hotels is the Hotel Pulitzer, overlooking the Prinsengracht and the Keizersgracht.

In the heart of the city is the newly restored hip Hotel de l'Europe, where suites designs are inspired by the paintings of Dutch masters.

Getting there

Eurostar offers connecting tickets to Amsterdam from £116 in four hours 16 minutes. www.eurostar.com, 0843 218 6186.

Rooms at the Hotel Pulitzer start from €272 per night. Private canal tours start from €40 per person. www.luxurycollection.com/pulitzer, 00800 32545454

Rooms at The Hotel de l'Europe start from €489 per night. www.leurope.nl, +31(0)20 531 17 77.

An iAmsterdam card includes free admittance to many attractions, including discounts on canal cruises and cycle hire. A 48 hour pass costs €48. www.holland.com or www.iamsterdam.com.