The Israeli relationship with this city is captured in a hit song about a 20-something who moves here from Jerusalem: "I mix in with the scene. Everything is fresh, and that's good," goes the hip-hop verse by Dag HaNahash. "After two years of Sodom and Gomorrah, I don't recognize myself in the mirror."

Welcome to The Bubble, as Israelis call it. Here, residents forgo news about Hamas rocket fire for an espresso, then mosey down to the beach. While Jewish settlers spar with Palestinians in the West Bank, "Tel Avivis" make merry at disco clubs.

"Here you have the freedom to dress the way you want, do what you want, and say what you want," says Tali Kushnir, owner of a vintage clothes boutique. "When we sit here we don't feel Gaza and we don't feel the settlements. We feel the beach breeze and watch people walking half naked in the streets."

Ms. Kushnir's shop, Machteret – Hebrew for "underground" – stands just blocks from where Tel Aviv was founded a century ago as the first "Hebrew city" – a Zionist fusion of modern Jewish nationalism and the land of the Bible. The shop is named after the Jewish militants based in Tel Aviv who prepared for what Israelis call the 1948 "war of liberation" against their Arab neighbors.

To mark its centennial, Tel Aviv has staged a public tribute heavy on pyrotechnics, as well as a nocturnal citywide block party. It has lured international cultural acts like Italy's La Scala opera. But its birthday comes at a time when the liberal city seems increasingly out of step with Israel's shift to the right.

Hanoch Marmary, a former editor at the Haaretz newspaper, says Israelis have a love-hate relationship with the city: "Tel Aviv is an icon. It is a dream. It's a concept. It symbolizes success, an open life, and hedonism," he says. "But it also raises feelings of jealousy. On the one hand you want to be part of it, and on the other hand there's condescension, fear, a recoiling, and jeering" of Tel Aviv.

Israel's district police chief for West Bank settlements launched a tirade against Tel Aviv, alleging that residents' "willingness to contribute to the state is one big zero." While defending the settlers, the officer denounced Tel Avivis who, from the comfort of their posh lives, "allow themselves to level criticism."

An outgrowth of the ancient Medi­terranean port city of Jaffa, Tel Aviv became the center of Jewish political, intellectual, and artistic activity before Israel's independence. Even though Israel declared Jerusalem – a 50-minute drive to the southeast – its capital, Tel Aviv remained home to the country's major political parties, media outlets, and the military.

"Tel Aviv has always been the true capital of the Zionist movement," says Tom Segev, a Jerusalem resident and author of several history books on Israel. "Tel Aviv is the center of real Israel."

Today it is the core of a metropolitan sprawl of about 2 million. The growth of high-tech companies, venture capital, and financial firms make it the country's economic engine.

The influx of foreign investment has spurred a boomlet of modern office and residential towers and an accompanying surge in galleries and gourmet eateries.

Despite its prosperity, the city retains a contrarian spirit. In the last muni­cipal election, a non-Zionist socialist candidate who ran against big developers won only about one-third of the vote. Shopkeeper Kushnir says many of her friends are going to parlor meetings held by left-wing groups trying to rebuild after the rout.

"There's more sensitivity to human rights here, more compassion," Kushnir says. "All the things that are problematic in the rest of Israel. The problem is, we're not doing enough to change it. We're too used to living in a nice place."

It has become fashionable to call Tel Aviv "a bubble." Though popularized by Tel Avivis, the name evokes images of unpatriotic draft dodgers, Dionysian clubbers, or profit-seeking capitalists.

Over the past decade, the city has drawn more and more young Israelis. The critical mass of artists and intellectuals gives the city a bohemian flavor. Just across the street from Kushnir's boutique is the Little Prince used-book shop and cafe, which attracts young leftist Israeli literati.

The stereotype of indifference is ironic, given that the city is the command center of the Israeli Defense Forces, located in a giant bunker underground, and that the city was the target for Iraqi ballistic missiles in the 1991 Gulf War. But when missiles rained down on northern Israel during Israel's 2006 war with Hezbollah in Lebanon, Tel Avivis were criticized for sipping lattes and sunning themselves on the beach as usual.

"Here people accept reality as best they can and try to live with it. The problem is that they become apathetic," Kushnir says. "The hilltop youths in the settlement outposts are the real fighters. They are the ones trying to change."