The Museum Wars; Europe's great art institutions are racing to transform themselves into modern centers of entertainment.

Byline: Tara Pepper (With Stefan Theil in Berlin, Barbie Nadeau in Rome and Mike Elkin in Madrid)

At the Prado museum in Madrid visitors can peer into the past in a new exhibit of 19th-century photographs, which show artworks crammed on the walls wherever they would fit. Lithographs, paintings and plans chart the higgledy-piggledy development of one of Europe's best-loved art-treasure troves. Similarly, London's British Museum opened a new Enlightenment Gallery this year to celebrate the historic role of museums as centers of learning, displaying--among other things--intricate catalogs of 17th-century botanical specimens.

While such exhibits enshrine the past, ambitious new plans for the future are transforming the dusty halls of some of Europe's most revered galleries. In Germany, Spain, Italy and Britain, museums are scrambling to create bigger, more-dazzling exhibition spaces, smart new restaurants and shops, study centers and inviting public areas. The push reflects a shift in how the public regards its artistic institutions. "People want more than the old-style museum," says John Lewis, chairman of the Wallace Collection, a gallery of 17th- and 18th-century paintings, porcelain and furniture in London. "We are driven to become more an arm of the entertainment and education industries rather than the academic institutions we used to be."

Throughout Europe, the race is on. With demand for culture increasingly driving tourist dollars, "cities are trying to compete for them," says Mintel research analyst Richard Cope. Madrid is hoping the $226 million refurbishment of the site that contains the Prado, the Reina Sofia modern-art museum and the Thyssen-Bornemisza Museum, will raise its cultural profile to match that of London. New galleries will increase the museum's current exhibition space to more than 160,000 square meters--not including the 13,000 square meters for cafes, restaurants, theaters and offices, all linked by tree-lined paths.

No European museum expansion is more ambitious than Berlin's restoration of Museum Island, a UNESCO World Heritage Site in the city center. The $2.1 billion project slated for completion in 2015 aims to turn the island into the largest art complex in Europe, covering all the major cultures in six museums filling 88,000 square meters. The Alte Nationalgalerie, an ornate classical temple built in 1866, reopened two years ago, displaying 19th-century artists, including German Romantics. Renovation of the neighboring Bode Museum, with its collection of Medieval and Renaissance art, is well underway, and the Neues Museum is being rebuilt to house Egyptian and prehistoric works. There are even plans to reconstruct the neighboring Hohenzollern Palace to showcase Berlin's extensive collection of non-European art. And British architect David Chipperfield has been commissioned to create a striking new entrance to the whole complex.

These institutions are hoping to repeat the triumph of London's Tate Museum, which spent $243 million to convert a disused power station into a gallery of modern art. When the Tate Modern ...