The inner part of District 8 (Józsefváros) is becoming the new-cool part of Budapest. Increasingly more locals and plugged-in tourists find refuge in this peaceful neighborhood lined with pretty pre-war residential homes as they escape the tourist-saturated Jewish Quarter just a few blocks away. Although new places are mushrooming here too, the number of cafés and restaurants still pale in comparison to those in the party district and they're generally more familial and small scale.

This area is also known as the Palace District, because in the 19th century the country's wealthy nobility, attracted by the increasingly buoyant political life in Pest, built extravagant mansions here. Three of the most impressive buildings are directly behind the National Museum. It’s also worth strolling down Bródy Sándor, Horánszky, and Múzeum Streets to enjoy the architecture. To get a feel for how some of these buildings looked from the inside, be sure to pop in to the Szabó Ervin Library.

The 4th floor of the Szabó Ervin library. Once here, purchase a tourist pass (€1) and proceed to the 4th floor, where they preserved some of the original furnishings. If you go during finals week, you will see herds of students cramming in the chandelier-studded former ballroom or the wood-paneled cigar room. It's just as cool as it sounds. You can linger more at the ground floor café, formerly the horse stable, which hasn't exactly transitioned yet to the 21st century (watery coffee and stale sandwiches) but it's cheap and part of the experience. Around the corner from the library is Építészpince, which has an impressive ivy-covered interior courtyard open to the public; it's the perfect opportunity to get your daily instagram post out of the way.

Interestingly, a total of six universities have campuses in this tiny area, ranging all the way from a German-language college to the Pázmány Péter Catholic University's law faculty, and Central Europe's only university for Jewish studies. This means that many wallet-friendly bars, cafés, and tea houses in the neighborhood cater to the student population including Műhely Egyetem Café and Altair.

For coffee in the Palace District, the hip Lumen is a good place to start. Besides specialty coffee, this all-day café also serves egg-based breakfasts, craft beers, and a range of local wines. It's worth checking back here at night, when the space transforms into a lively bar and they host almost daily live music acts featuring quality local musicians (lots of world music and indie rock). Bisztrónyúl is a charming, hole-in-the-wall designer store and coffee shop. For an immersion into everyday Budapest life, stop by for a drink at Krúdy Söröző, which draws an eclectic crowd from all walks of Budapest life.

If you like Italian food, then Al Dente should be a no-brainer destination for lunch or dinner. The Italian chef makes authentic southern-Italian dishes simply and well. They can be washed down with reasonably-priced wine from the Apulia region. Almost across the street from Al Dente is Al Dente On The Go, a pastry shop run by the same owner that specializes in Italian staples like arancini, cannoli, and zeppole. Besides Al Dente, the other highlight of the culinarily not-yet-so-developed District 8 is Padron, a cute, reliable, family-run Spanish tapas place. Curiously, one of Budapest's best Indian restaurants, Curry House, is also in District 8.

The outer part of District 8 is still known to some as the Harlem of Budapest because of its historical reputation as an unsafe neighborhood. An eclectic group of locals live here, including many low-income residents. It's totally safe during the day; come nighttime, the streets get eerily deserted. One of the best spots here used to be Csiga, an inviting all day café and restaurant. Recently, however, they jacked up the prices which alienated many local regulars and now it's mainly a foreign crowd that frequents it.

Next to Csiga stands the impressive building of the Rákóczi Market Hall. There's an air of bustling activity by the countless meat and vegetable stalls early in the mornings. Jókrisz Lángos Sütöde, a mom-and-pop food stall hiding in the back of the building, makes excellent lángos, a deep-fried dough topped with sour cream and grated cheese. It's also worth visiting Műterem Kávézó, an eight-minute walk from the market hall, which is a coffee roaster and café, whose owner deserves a hat tip for bringing specialty coffee to this neighborhood, rather than to a well-trodden inner-city location.

The streets in and around Népszínház Street have been for decades the home of immigrants and various ethnic minorities, including the Roma, Turks, Arabs, and Africans. Its chaotic, lively, and littered streets, diverse local population, and small businesses (including a Persian and a Turkish grocery store, and a Nigerian barber shop) offer an unexpected glimpse of the colorful Budapest which even some locals are unaware of. The often shockingly dilapidated condition of the buildings here stands in wild contrast to the pristine facades of downtown.

The outer part of District 8's lively bar scene is one of its main attractions and best kept secrets. These bars are predominantly frequented by students and non-establishment, free-spirited locals, and offer a good chance to see this face of the city too. Kék Ló and Hintaló Iszoda are popular among students and adorably rebellious types. Macska, known for its local craft beer selections, draws a somewhat older and similarly laid-back crowd.