Can architecture end a war? Steve Rose travels to Israel to see Peace House, a new building with big ambitions - and a bomb shelter on every floor

With all the ironies crushing down on it, it's amazing this building is still standing. Opening shortly after a devastating conflict, the Peres Peace House is a venue for propagating peace and improving ties between Israel and its neighbours. Furthermore, this smart new piece of architecture is named after Shimon Peres, elder statesman of Israeli politics, Nobel peace prize laureate and founder of the Peres Centre for Peace, a successful non-governmental organisation. He is also the country's president, which complicates matters. While the Peres Centre arranges for the treatment of injured Gaza children in Israeli hospitals, Peres publicly defends the military attacks that put them there.

But the Peace House could yet live up to its name. When it opens next month, the building will serve as the Peres Centre's new HQ. Its ethos is that peace in the region will be made between people, not governments, and its activities range from organising football matches between mixed Israeli and Palestinian youth teams to establishing a cross-border chamber of commerce. The new building enables the Peres Centre to host conferences, talks and arts events. It will also house Shimon Peres's personal library and archives, for the benefit of researchers and students. A one-stop peace shop, if you like. But as well as helping to achieve peace, this building had to somehow represent it - to make solid an abstract quality.

Landed with this tall but prestigious order was Italian architect Massimiliano Fuksas. Though little known in Britain, Fuksas is one of Europe's most renowned architects - an expressive innovator who would rather design with a paintbrush than a computer. His work varies wildly in style but is marked by a sculptural flair that gives rise to grand gestures and memorable forms. His recent Zenith music hall in Strasbourg, for example, is a wonky drum covered in an orange membrane that lights up at night like a lantern; his huge Milan Exhibition Centre, meanwhile, is draped in a swirling roof of steel and glass.

The Peace House is another of Fuksas's poetic one-offs, although it shows an appropriate degree of restraint. It is situated on the seafront in the ancient port town of Jaffa, just south of Tel Aviv, an area populated, peacefully, by both Israeli Arabs and Jews. In essence, it is simply a long box emerging out of the hillside. The short end, facing the sea, is a wall of clear glass; the other three sides are made up of thin horizontal bands of copper-green concrete and glass of various thicknesses, layered apparently randomly, like sedimentary rock. These strata, says Fuksas, allude to "time and patience, the stratification of the history of two peoples". The building materials, too, represent "places that have suffered heavily": solid concrete for times of stability, fragile glass for conflict and turmoil. The only clear view is out to the sea - to the future. "It is the representation of an emergency," says Fuksas of the building.

It all sounds rather literal but in reality it works marvellously. On the outside, the Peace House immediately stands out as something different - monumental yet light. To enter, you walk down from the road at the top, through a landscaped park alongside the building and round to the glass front doors facing the sea. While the walls are smooth and flat on the outside, on the inside the concrete strata project out, giving the sides an undulating, almost natural texture. Light entering between these concrete slabs illuminates the space magically, even mystically. At certain times, the low sun shines into the building, casting curious shadows, but generally it is filled with a soft, diffused glow that changes with the time of day. It feels, well, peaceful.

"I always try to do something I have never done before - that is my way," says Fuksas. "When you do a project, the first thing it has to be is useful for its tenants, but much more importantly, it has to have alchemy - like this magical light where you cannot see its origin. Because with this alchemy you have emotion. A building without emotion is not architecture."

The most dramatic space is Peres's library, at the back of the building, on the ground floor. You're basically standing underground here, since the building is half-submerged in the hillside, but an atrium rises up the back wall to skylights in the ceiling. There's a clear metaphor here - reaching upwards from the depths - but the space is powerful enough on its own terms. The other show-stopping area, and the climax of the public route through the building, is a wood-panelled auditorium on the first floor. Rather than the usual black box, its back wall is a giant window facing the Mediterranean. "If you don't want to listen to the people speaking, you can just watch the sea," says Fuksas.

The Peace House feels a bit like an inhabited monument - a beautiful art installation that unfortunately had to be divided into rooms. The interior tries its best not to disrupt the overall effect, though. In places, the upper floors don't quite touch the walls, with glass filling in the gaps. The internal divisions are also glass, where possible, although there is a concrete core running through the building containing stairs and services, plus a uniquely Israeli architectural feature: a reinforced "panic room" on each floor, a shelter in case of bomb or gas attack. Every new building in Israel is required to have them.

Building the Peace House hasn't been easy, Fuksas says. The project began more than 10 years ago - at a time when peace in the region did not seem such a distant prospect. Then, it was a joint initiative between Peres and Palestinian leader Yasser Arafat, to be situated in Tulkarem, close to the West Bank-Israeli border. After Arafat's death, it proceeded in its current form, but there were myriad problems with acquiring the site and the funding (from private donors - Peres is nothing if not well-connected). Fuksas's grand vision was not easy to translate into reality either. It was imagined that the horizontal concrete elements would be made offsite then simply stacked on to columns, like a giant child's game. But this proved to be logistically impossible. So a local architect had to work out an alternative, whereby the walls were patiently built up one layer at a time. On the metaphorical level, that's somehow appropriate.

There's still an uneasy split running through this project, though. As well as that crushing irony (Peres strives to be the big peacemaker while defending Israeli military action), the Peace House wants to be both a US-style presidential memorial library and a grassroots NGO headquarters, part gift to humanity, part vanity project. "Sometimes, this fact is awkward," acknowledges Ron Pundak, the Peres Centre's director. "But basically we are putting a very clear distance between his activity as president and our activities as the Peres Centre for Peace."

Pundak also admits to some discomfort about the prospect of receiving, say, a Palestinian partner from a refugee camp in his shiny new HQ. At present, the Peres Centre operates out of a nondescript office block in Tel Aviv, which is probably better suited to its activities. "I won't find myself very comfortable there," says Pundak of the Peace House. "But it does not reflect the Peres Centre for Peace - it reflects the vision and life and future of Mr Peres. This is the innovative approach of Mr Peres. He's not a normal politician."

Nor, it bears remembering, is Israel a normal place in which to build. Architecture has almost become an instrument of warfare in this region. There is the notorious West Bank barrier, for example, which Israel has unilaterally built (and continues to build) around Palestinian areas. Israel says the barrier has improved security against cross-border terrorist attacks; Palestinians say it severs and imprisons communities, and amounts to a land grab. Architecture has also been used as a weapon in territorial disputes. Best known are the Israeli settlements that have been built across the West Bank over the last 40 years. Israelis counter that Arabs have also built up areas, particularly around Jerusalem, in order to reinforce future territorial claims, even though many of the buildings stand empty.

Above all, of course, there is the destruction of buildings and infrastructure in Gaza, and the sisyphean task of rebuilding them. In this context, the Peace House is a much-needed contrast. Whether or not it cultivates peace, it at least sends an alternative message. Fuksas is the first to acknowledge that such expressions can easily be dismissed as hopelessly idealistic - but, he adds, that doesn't mean we shouldn't be making them. "We must never stop thinking peace is possible," he says.