German museum once dubbed the most beautiful in the world set to welcome back artworks banished by the Nazis

On a visit in 1932, Paul J Sachs, the co-founder of New York's Museum of Modern Art, referred to it as "the most beautiful museum in the world", whose influence stretched way beyond German borders. But then one of Europe's first and finest public collections of contemporary art was declared "degenerate" by the Nazis, the Folkwang was brutally broken up and 1,400 of its works – including Chagalls, Picassos, Matisses, Kirchners and Gauguins – were strewn around the world.

This weekend the museum, in the western German city of Essen, will be returned to its former glory as a temple to modern art with the opening of the British architect David Chipperfield's much-vaunted new glass and concrete space.

The building, say critics, exudes calm. One described it as "resembling a meditation centre", another likened it to "snowflakes in a glass skirt", so weightless does it appear from inside and out compared with much of the Ruhr valley's heavy industrial architecture.

Summing up what he thought important about his design, Chipperfield – who beat other celebrated architects including Zaha Hadid and David Adaye to win the commission – said: "You want to lose yourself in it, as well as being able to orientate yourself."

The Folkwang building, a series of cubes whose windows are made out of recycled glass, reinforces London-born Chipperfield's status in Germany as a darling of modern architecture. It comes hot on the heels of his highly ambitious transformation of Berlin's war-torn Neues Museum.

The Folkwang redesign, which to the Germans' delight was completed on schedule and within budget, will come into its own in March with the opening of the exhibition The Most Beautiful Museum in the World. The show will bring together for the first time in more than 70 years the artworks that were stripped from the gallery's walls by the Nazis in 1936.

Among the returning treasures will be works by Oskar Kokoscha, Wassily Kandinsky and Ernst Ludwig Kirchner. Marc Chagall's vibrant Purimfest, a dusky self-portrait by Giorgio di Chirico, Paul Gauguin's Contes Barbares, as well as Grazing Horses by Franz Marc, currently in the Harvard Art Museum, will hang once again in Essen.

The Folkwang collection – the name derives from Hall of Freyja, the Norse goddess of love and beauty – was first established in 1902 by the cultural philanthropist Karl-Ernst Osthaus, whose vision was to anchor modern art in the centre of urban life. The Folkwang model subsequently inspired many art museums around the world.

The €55m reconstruction was made possible by Berthold Beitz, a philanthropist and former steel baron whose name is inextricably linked with the fortunes of industrial Germany and who initiated his Krupp Foundation to finance the project.

The 96-year old, who greatly plays down his little-known role in saving 800 Jews from the Holocaust by convincing the Nazis they were vital to the war effort, said returning the museum to its former status was his gift to the citizens of Essen. "My only wish had been that I'd be alive to see it, and now my dream has been fulfilled," he said.