Dancing house.

Frank Gehry's exuberantly gestural new office building on the edge of the Vitava river is a bold symbol of Prague's architectural, economic and political renewal.

The history of the site now occupied by Frank Gehry's Nationale-Nederlanden Building on the edge of Prague's Vitava river, is as Byzantine as any plot devised by Kafka. In 1945 an American bomb devastated a handsome Neo-Classical apartment block on the corner of two streets (Jiraskovo namesti and Rasinovo nabrezi) narrowly missing the neighbouring Art Nouveau house of Vaclav Havel, the distinguished writer and future president of the Czech Republic.

During the post-war Communist era, the site where the bombed apartment block stood remained vacant and attempts to find a use for it only gained ground after Czechoslovakia's Velvet Revolution of 1989. Havel, now president, expressed a wish to redevelop the plot to house an altruistic mixture of cultural and social functions, including a bookshop, gallery, multi-purpose hall and rooftop cafe. He discussed his ideas with Viado Milunic, a Croatian architect living in Prague, who along with two other architects (Jan Linek and Vit Maslo) was informally invited to put forward development proposals. Of the three designs, Milunic's witty, symbolist creation perhaps best epitomised the carnival character of the Velvet Revolution. His sketches show an angular building, crowned by a high glass cupola, containing allusions to the Tatlin Tower and the neighbouring Art Nouveau house, built by Havel's grandfather.

Inevitably, perhaps, Havel and Milunic's philanthropic notions were trumped by the power of market forces, when in 1992 the site was acquired by the Dutch insurance company Nationale-Nederlanden, for development as an office block. Yet vestiges of the original concept remained, with the inclusion of shops at ground level, a basement cafe and a rooftop bar and restaurant. Seeking a suitably high-profile international architect for this important project in the new Eastern Europe, Nationale-Nederlanden eventually alighted on Frank Gehry, but Viado Milunic was retained in a collaborative capacity, acknowledging both his familiarity with Prague and his initial work on the site. During meetings in Switzerland and California, Gehry and Milunic established a close working rapport, and although the main design role fell to Gehry, the evolution of the scheme was informed by Milunic's original proposals.

In early sketches, Gehry envisaged the building as a scrummage of boxy and pillow-like forms, to which Milunic added a geyser-shaped tower. The site turns the corner, so a pivotal tower was a logical point of departure; corner towers are also characteristic of Prague's rich urban texture. However, Gehry apparently considered a single tower too overtly masculine, so the idea of a feminine counterpart evolved, a female yin balancing the male yang, giving rise to the analogy of a dancing couple, whimsically described by Gehry as 'Ginger and Fred'. In reality, the analogy has become more abstract (and Gehry has since played down the Hollywood overtones), but the effect of the two towers poised in a fluid embrace is still extraordinarily lyrical, a show-stopping performance in a city full of ancient, sensuous and disturbing architecture.

Each of the two towers is essentially a distorted cylinder; the diameter of the dominant, solid male tower expands as it extends upwards, while its glazed female partner is dramatically cinched at the waist like a melting hour-glass. A small forest of columns peeks out of Ginger's wispy transparent skirts, a fizzy froth of metaphorical legs and petticoats suddenly tumbling on to the street below, marking the entrance to the building on Jiraskovo namesti. Fred's more robust contours are clad in neutral stucco, animated by a wavy bas-relief pattern and undulating lines of windows that extrude slightly from the curving wall planes. A fractured mesh bauble resembling a traditional onion dome crowns the top of the tower. The syncopated external vocabulary of stucco and windows is carried around the corner into the Rasinovo nabrezi elevation overlooking the river; it also buttresses the gap between the ethereal hour-glass tower and Havel's Art Nouveau building on Jiraskovo namesti.

Behind the swirling facade is a relatively simple plan form based on a conventional relationship of lettable space organised around a compact, L-shaped circulation core. The generous protuberances of the towers provide convenient enclaves for meetings or conferences. Six floors of offices are topped by a bar and restaurant with stunning views of Prague. There are shops on the ground and lower ground floors, and a small cafe at pavement level, set back under the fat circular legs of the larger tower. By providing a degree of animation and public interaction at ground level, the building is much less insular than many traditional office developments, which consciously exclude the public.

Despite its undeniable panache and presence, the overall effect of Gehry's anthropomorphic collage is slightly disorientating. You half expect the two towers to burst out of their exaggeratedly dynamic clinch and go waltzing off down Rasinovo nabrezi. Perhaps it is due to a nagging sense that their activities are confined by the constraints of making a corner building (Fred and Ginger usually had the floor to themselves and Gehry's intensely sculptural buildings are typically free-standing). Here, reinstatement of the city grain has clearly come second to the creation of a symbolic new intervention intended to epitomise both architectural and political renewal. Some commentators have compared its effect to Hollein's Haas Haus in Vienna (AR July 1991) which also transplanted an undeniably contemporary building into the ancient heart of an Eastern European city. On the banks of the Vitava, the Nationale-Nederlanden building is within sight of the National Theatre and the Gormenghast silhouette of Prague Castle. Yet in its brazen synthesis of historical precedents- bustling baroque, sinuous Art Nouveau, even suggestions of Czech Cubism - it trips a decidedly light fantastic.