During our stay in Cusco, Peru, we picked our hotel in the San Blas district of the city. I had read that this is where you could find great galleries, restaurants, and historical sites. They all proved to be true. Our hotel was the Casa Andina San Blas which was at the end of this street.
San Blas is a beautiful part of town that features the very finest of both Inca & Colonial architecture. It is also a very steep part of town, so there are a lot of stairs that act as streets. Because of this, there is very little car activity in the heart of the area.
One of the most popular restaurants in the city is Pachapapa, which is on the San Blas square. It features a courtyard with a huge oven where most of the meals are prepared. On the weekends, there is a beautiful artists market that features jewelry, painting, and textiles.
At night, I'd highly recommend just wandering the streets in this part of town. Pop your head into a cafe and have a Coca Tea, or sit on the square. San Blas is quintessential Peruvian culture and a must see for anyone visiting Cusco.