BEING IN the bookshop Shakespeare & Company is a little like viewing life through a convex mirror. Shelves climb to the ceiling, cling to walls and stoop with the weight of sagacious volumes. The light from a dusty chandelier softly illuminates an iron-rimmed wishing well sunken into the floor. Frosted glass mounted on a wall reveals a crowd shuffling through the premises, browsing and marvelling.

Shakespeare & Company is a famous corner of Paris, and a favourite haunt of tortured geniuses. William Burroughs came here to research deformity, Allen Ginsberg was seen here drinking like a fish to pluck up courage for a public reading of his now-legendary beat poem Howl, and Samuel Beckett has skulked glumly in a corner. It is now a favourite hang-out for literary tumbleweeds.

In 1951, George Whitman, an American bibliophile, opened this bookshop, which he originally called Le Mistral, after the wind that sweeps through southern France. Overlooking the Seine and Notre Dame, it enjoyed spectacular views, even if the area was distinctly seedy. Today, largely unencumbered by shady establishments, this Shakespearean spot in the fifth arrondissement is a limpet from an edgier age. Hoteliers must shake their heads and hurry past, muttering things like: "A bookshop in such a prime location, c'est incroyable!"

Renamed Shakespeare & Company to celebrate the bard's 400th birthday, it has flourished as both a bookshop and impromptu hostel. Thousands of young writers, travellers and students have slept on mattresses around the shop, living the dream and helping out. Like an octopus reaching out its tentacles, the bookshop has gradually extended - over the ground floor, then the first, skipping to the third floor and sidling further along the street.

Visitors typically only see the ground floor, antiquarian room and first-floor library with its 10,000 or so books. Access to other areas is dependent on many vagaries, not least whether any of the staff takes a liking to you.

When I was there recently, it all seemed fairly quiet. Previously, I had encountered blonde giants hunched over typewriters; swirling-skirted girls with foreign accents serving tea; books inexplicably filled with thousands of francs. But on my most recent visit, such characters had been replaced by studious men and women who seemed as though they might actually "read a book a day", which has always been Whitman's ambitious maxim for his guests.

Since Whitman's official retirement just over two years ago, at the age of 91, the management of the shop has been in the hands of his daughter Sylvia, named after Sylvia Beach. Beach was the American proprietor of this shop's predecessor. Also called Shakespeare & Company, it opened in 1919, moving to number 12 Rue De L'Odeon two years later, and was a celebrated literary haunt until it was forced to close by the Nazis in 1941. Whitman resurrected the name and so kept the original spirit alive. Against this backdrop it is tempting to wax lyrical about the similarities between Beach and Whitman's daughter Sylvia, but the 26-year-old is very much her own woman.

Under her management, the shop seems tidier and easier to negotiate.

Here, in the soft yellow light, surrounded by learning, and standing on a step inscribed with slogans such as, "Live for Humanity", the visitor feels elevated. Mind you, that is not true of everyone. Plenty of people come away mumbling about pretension or paraphrasing the French philosopher, Jean Baudrillard, with something like: "It's all surface! Superficial!" The shop's stone floor is surely imprinted with the memory of conflicting footsteps, which is what helps keep it so interesting.

Shakespeare & Company stocks new, secondhand and antiquarian titles, arranged in sections, alcoves, or on any available surface that has a claim to being horizontal. At the back, to the left, is a well-stocked Russian section, to the right, a jumbled art section and around the corner, an upright piano. I imagine a musician trying his best, as the instrument shows an alarming tendency to idiosyncrasy.

Books about the so-called Lost Generation writers such as F Scott Fitzgerald, Gertrude Stein and Ezra Pound, who were based in Paris during the 1920s when the original Shakespeare & Company was in operation, are at the front. It is a running joke that a copy of Hemingway's Parisian memoir, A Moveable Feast, sells every two seconds; often to fans wanting to emulate the lifestyle of their hero, who was associated with the first Shakespeare & Company.

Sylvia, however, discovered that writers, no matter how stupendous, get very, very dull if they are invoked too often. "I was absolutely sick of talking about the literary history of the bookshop," she explains, wryly. "Each time that I spoke about these great things in the past, it would remind me that there was this sense of stasis. I felt that I needed to put some energy back into the bookshop."

She duly organised the first Shakespeare & Company literary festival in 2003. The festival, entitled Lost, Beat And New, celebrated the bookshop's past, while confirming the vitality of the present. The second festival in 2006 took the theme of travel writing. The 2008 festival, Real Lives: Exploring Memoir And Biography, will feature Paul Auster, Alain de Botton, Antonia Fraser, Victoria Glendinning, Richard E Grant and Jeanette Winterson, who calls Shakespeare & Company "the best bookshop in the world".

It is a sentiment shared widely. Every time Bill Clinton visits Paris he pops into the shop; at least this is what he told Sylvia Whitman with beguiling sincerity. I spot a photo of him smiling, next to George Whitman. George, in his pyjamas, is not smiling. Perhaps that's because the presence of a US president sits a little uncomfortably with Whitman's image of Shakespeare & Company as "a socialist utopia masquerading as a bookshop".

Despite the odd run-in with the Parisian authorities over the decades, the bookshop now enjoys the city's blessing. Officials are keen to help and promote bookshops, so while independents close in Scotland, bashed by internet shopping and regulations, those in Paris are sheltered by stately beneficence. Sylvia Whitman tells me that the city will help bookshops with their rent. "Can you imagine that happening in Britain?" she asks. Paris quite simply lives and breathes literature, from its 250 bouquinistes, or book stalls, lining the banks of the Seine, to its grand libraries, literary cafés, louche authors and plentiful bookshops, French and foreign. In the fifth arrondissement alone there are 163 bookshops, including Dedale, L'Arbre à Lettres and Librairie Buridan. These three are working with Shakespeare & Company during the festival, selling French translations of participating authors. "Including independent bookshops and involving more people adds a richness to organising the festival," says Sylvia Whitman.

The energy and momentum of the festival appears unstoppable. French and Anglophone links are forged and strengthened. This, however, is nothing new. There has traditionally been a strong and productive relationship between the American and French literati.

Beach, after all, was inspired to set up the original Shakespeare & Company by an extraordinary French bookseller called Adrienne Monnier, and when Shakespeare & Company was threatened with closure during the 1930s depression, it was Andre Gide and other French bibliophiles who stepped in to save it. A plaque fixed between a bookshop and a jewellery store on Rue De L'Odeon pays tribute to the site of the original Shakespeare & Company and to James Joyce, whose masterpiece Ulysses was first published by Beach. Sadly, I could not find a plaque commemorating Monnier and Adrienne's shop, La Maison Des Amis Des Livres, which used to be located almost opposite.

Nearby, tucked into the narrow streets of the Latin Quarter, between the present Shakespeare & Company and the shadow of its predecessor, are some superb French bookshops, generally more austere than their foreign counterparts. Anglophone independents like The Red Wheelbarrow Bookstore, San Francisco Book Company and Village Voice have developed a reputation for friendliness and perhaps also sociability; the Parisians prefer style, preferably discreet.

Browsing their beautiful books requires nerve and confidence. I think I was impeded during my last visit to a French bookshop because I was soaking wet, and afraid that water was pooling on the floor. However, after a while the gentle hum of contemplation proved seductive. I opened an antiquarian volume and the spine stretched like an animal, made supple by many hands. Paris is a great city for museums, cafés and galleries, but to begin to understand its literary history, simply open a book.