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Drive out of central London along the Westway and you pass four new nine-storey blocks that seem to have been conjured out of nowhere. Emblazoned with the sign "Paddington Central", the cluster of blocks has risen from an almost invisible sliver of land overshadowed by the motorway flyover and wedged in by the scrum of railway lines emerging from Paddington Station.

Not surprisingly, it has taken nearly a quarter of a century to develop this former railway goods yard. The development of Paddington Canal Basin and its Richard Rogers towers, on the other side of Bishop's Bridge Road, has taken nearly as long. Both sites have been afflicted by transport blight: just as cars in cities can produce gridlock, certain locations are apt to suffer from the immobilising effects of too much transport.

Paddington's transport blight has long been a subject of fascination for architect and urban designer Sir Terry Farrell, who has lived and worked in the vicinity all his professional life.

He points out that the area has been criss-crossed by every major transport initiative of the past two millenniums – and all of them are still in existence. Starting with the Roman Watling Street – still serving as the Edgware Road – the area made way for a stagecoach road to the City in the 17th century, a large canal basin in the 18th century, and the terminal and goods yard for Brunel's Great Western Railway, along with the first of three underground lines, in the 19th century. Within living memory the area has gone on to accommodate the car, by means of the Westway – which erupts into a triple-level concrete extravaganza as it sweeps past the goods yard – and air travel, represented by the Heathrow Express train. Still to come are four CrossRail lines pencilled in for development after 2007.

All these transport modes have succeeded in making Paddington the western gateway to London. But the concentration of roads, waterways and railways leapfrogging over each other in their determination to come together in one great transport interchange has had the effect of cutting Paddington off from the rest of the capital. Paddington Canal Basin, a spur off the Grand Union Canal that rivals the docks of east London in size, has lain hidden from commuters speeding into the city by road or rail just a stone's throw away. As for the former goods yard, it has been a lost world behind the impenetrable barriers of the Westway, the multiple railway lines and the canal on all three sides.

Although a succession of ambitious development plans for the area have been hatched by public authorities and private developers since the Abercrombie Report of 1944, the only buildings constructed before 1999 were a public sector school and hospital. Since then, however, things have suddenly taken off, with some 800,000 m2 of development work now in the pipeline.

What, then, has suddenly unlocked Paddington? Partly, it is the commercial pressure by developers to find sites in the heart of the capital as, since 1989, London's population has been growing at an increasing rate. In its draft London plan, published in June, the Greater London Authority classifies Paddington as the most productive (though with 30 ha of development land, not the largest) of seven opportunity areas in central London: it anticipates that the area will create 23,200 jobs and 3000 homes by 2016.

On top of that, Paddington has been subjected to a urban planning process that Farrell describes as "stitching the city back together again". In a masterplan for Paddington Basin drawn up in 1996 for property developers Godfrey Bradman and Elliot Bernerd, Terry Farrell & Partners proposed the addition of four crossings over the canal and basin that would provide connections throughout the development area to the surrounding communities. Significantly, these linkages are not roads or transport routes but narrow paths and bridges for pedestrians and cyclists, as it is local access for people – rather than citywide transport – that is the problem. The walkways would continue north and pass beneath the Westway in a series of pedestrian crossings. The edge of the canal basin is likewise being opened up to pedestrians for the first time, as the original warehouses were built hard up to the quaysides.

Farrell's other big idea was to reorientate the entrance to Paddington Station from the south to the north-east. By demolishing the easternmost vault of the station, which is not part of Brunel's hallowed structure, and a row of small industrial buildings on the canalside, the station concourse could spill out to the edge of the canal basin and connect up with new pedestrian and taxi access on that side. "It's just 15 minutes from central London to Heathrow Airport, so if the new Heathrow Express could be brought along the east of the station, it would have a dynamic effect in revitalising the whole canal basin area," reasons Farrell. His concept of a north-eastern entrance to the station is now the basis for an ambitious scheme by Nicholas Grimshaw & Partners that would be funded by developing large commercial buildings overhead.

As for Paddington Central, providing pedestrian linkages has been the key to unlocking the isolated goods yard, although this was not made easy by the canal and the Westway, which loomed over the sunken site on two sides, and by noise and pollution from cars and trains. The problems were so intractable that in 1999 developer Grainhurst Properties abandoned its plans for the yard, which had been drawn up by Richard Seifert in the late 1970s, and which had outline planning consent. It sold the site to Development Securities, which commissioned Sidell Gibson Architects to draw up a new masterplan and first-phase detailed design.

Opening up the canal towpath after 30 years' closure was an obvious start; this recreates the leafy, obstacle-free pedestrian route between Maida Vale and Paddington Station. Sidell Gibson then added a second pedestrian link by slinging another footbridge across the canal where it passes the development. The lack of sunlight and the pollution are mitigated by the installation of a double-storey podium containing shops and a health club, the roof of which has become the new ground level. The open space of this deck will be largely given over to gardens, footpaths, and a central tree-lined boulevard restricted to taxis.

The newly completed first phase of Paddington Central comes with a wonderful surprise. At the heart of this supremely hostile site lies a calm, spacious and lushly planted park. It is similar in size to the Broadgate main piazza at Liverpool Street Station in east London, but softer in landscaping, with terraced lawns stepping down to a crescent of shops at lower level. It is a hollow parkland core encircled by a hard shell of the four nine-storey slabs, two office blocks facing the pitiless Westway and railway lines and two housing blocks with more attractive prospects over the canal.

There is no central masterplan at Paddington. Co-ordination between the many individual development schemes is provided by Westminster council's planners and by the Paddington Regeneration Partnership, which is made up of all 12 developers involved. The partnership has agreed policies for transport, community funding and the design of the public realm.

Two other topical themes of town planning – mixed use and tall buildings – play key roles in the regeneration of the Paddington area. Mostly carried out by commercial developers; the development comprises offices and housing in roughly equal amounts, with affordable housing accounting for some 25% of the apartments. Shops, bars and health clubs occupy the ground floors or, in the case of Paddington Central, the basements. This should make for a 24-hour community and complies with the mixed-use principles promoted by the urban taskforce – although Graham King, Westminster council's chief planner for the area, notes that residential development in central London is increasingly favoured by market forces.

King, one of those all-too-rare planning officials who wins praise from many of the architects he deals with, explains the council's role in establishing density of development by saying: "We give a consistent story to all developers without imposing a masterplan. We have abandoned plot ratios and prefer to deal with each scheme on its merits and within its context, consistent with the council's unitary plan. As the sites are in competition with each other, this is the only way of dealing with developers. And it allows for greater densities than plot ratios would have given you."

The area in which the council does take a stand is building heights. For the buildings currently nearing completion, both at Paddington Central and Paddington Basin, King suggested a "shoulder" height of eight storeys and a cap at 10-12 storeys, similar in height to the 1980s St Mary's Hospital building overlooking the canal basin. But later applications in 2000 by Richard Rogers Partnership and Nicholas Grimshaw & Partners for the Grand Union Tower and the station air-rights building respectively were both for 42-storey towers, matching the City of London's tallest building, Tower 42. "They thought it sexy at the time," comments King dismissively.

The battle over Paddington's building heights then spread. London mayor Ken Livingstone, backed by CABE, weighed in to push for the commercial totem poles and Westminster council and English Heritage urged consideration of the views from 32 points, including Hyde Park.

In the event, Rogers and Grimshaw backed down. Rogers' revised scheme for the Grand Union ºÃÉ«ÏÈÉúTV is for an "organ pipe" arrangement stepping up to 30 storeys, only a few storeys higher than the 1970s tower of the Metropole Hotel nearby. What the building loses in drama, it gains in neighbourliness to surrounding buildings and ground-level spaces.

Perhaps the most significant aspect of the regeneration of the Paddington area is the preponderance of design-orientated architects involved, led by Sir Terry Farrell, Sir Nicholas Grimshaw and Lord Rogers. In the 1970s, commercial development was serviced by architects such as Seifert, who could extract the maximum floor area out of rigid planning constraints. At Paddington, this failed, as the overriding problem was the transport blight – and that could only be unlocked with imaginative urban design and responsive negotiation.

As Westminster council's King puts it: "This area has evolved from nothing at all. The sites were so closed in that they had no productive or amenity value whatsoever – and now they do. That's got to be good."