No city has been demonised quite like Babylon, nor any king so denounced as the incarnation of evil as Nebuchadnezzar. Neither the scriptures nor the myths have spared them: for more than 2,000 years Babylon has been a byword for vice, excess and well-deserved ruin while legend has created a ruler consumed by pride, folly and cruelty.

Yet Babylon was once the cultured capital of a flourishing empire, majestic in its architecture, rich in works of art and peopled by thinkers who pioneered mathematical and astronomical concepts still valid today. Nebuchadnezzar, its greatest and most ambitious king, was a man who changed the course of world history from a capital whose ruins remain in the parched Iraqi desert.

The name Babylon still has the power to fascinate. We think of the Hanging Gardens, the Tower of Babel, the Babylonian Captivity and the city’s infamous fall. For more than 1,000 years, painters and story-tellers have embellished the biblical denunciations of the city in the Book of Daniel and the Book of Revelation with vivid warnings to the Western world. In 1498 Albrecht Dürer depicted the “Whore of Babylon” as a harridan riding a seven-headed beast.

Nearly 140 years later Rembrandt showed us the fear and horror on the faces of all those present at Belshazzar’s feast as a mysterious hand traced the ominous Writing on the Wall. Oh, and let’s not forget Boney M’s pop hit of 30 years ago, The Rivers of Babylon.

Babylon, the exhibition that opens in the British Museum next month, explores the myths and relates them to historical reality. What is astonishing is the richness of both legacies: the archaeological treasures excavated from the ruins barely a century ago reveal a magnificent capital, while the myths have engendered an equally powerful legacy in art, thought, paintings, film and music. Cuneiform clay tablets, coloured tiles and brick friezes, papyruses, cylinder seals, sculptures and zodiac inscriptions testify to Babylon’s former glory while paintings, engravings, medieval manuscripts and maps show the preoccupation of later ages with this vanished city.

Many of these pictures and engravings are familiar. Who does not now see Nebuchadnezzar as William Blake saw him – a haunted and terrified man crawling on all fours, his face a mask of horror and revulsion? The poet showed the king’s madness, described in the fourth chapter of Daniel. In fact, the scriptures have conflated two historical events: there is no evidence that Nebuchadnezzar became insane; it was his successor Nabonidus who was afflicted with disease (probably scurvy) and vilified after he fled the city when it was captured by the Persians.

Dürer’s engraving of the Whore was an attempt to make physical and immediate the curse on an almost abstract City of Sin proclaimed in Revelation: “Then the angel carried me away in the Spirit into a desert. There I saw a woman sitting on a scarlet beast that was covered with blasphemous names and had seven heads and ten horns. The woman was dressed in purple and scarlet, and was glittering with gold, precious stones and pearls. She held a golden cup in her hand, filled with abominable things and the filth of her adulteries. The title was written on her forehead: Mystery, Babylon the Great, The Mother of Prostitutes, And of the Abominations of the Earth”. Little wonder that the city has had a bad press ever since.

What is astonishing, however, is how close to reality many of the medieval fantasies came. Many artists took the trouble of scouring the Ancient Greek sources, especially Herodotus, which described the former marvels of the city.

The Tower of Babel, for example, is often shown as a tapering edifice similar to the Coliseum in Rome, with ever diminishing storeys climbing into the sky. In fact, this is not so far removed from the famous ziggurat, the huge building erected by Nebuchadnezzar to communicate with the god Marduk, the principal deity of Babylon. The ziggurat was destroyed, and though Alexander the Great vowed to rebuild it and even cleared a space for its reconstruction, it was never reerected. But roughly the same corkscrew design was adopted for the construction of the minaret in the Great Mosque of Samarra in Iraq more than 1,000 years later.

For the British Museum, the exhibition is extremely timely. First, it gives the museum a chance to make more accessible its rich Assyrian collection, which has largely been overlooked in favour of more familiar ancient civilisations: Egypt, Greece and Rome. Some exhibits come from the Louvre and the Near Eastern Museum in Berlin. Paris and Berlin have already staged Babylon exhibitions.

Secondly, it celebrates the ancient history of what is modern Iraq. It was thanks to the international outcry, led by the British Museum, that the world was alerted to the looting of Baghdad’s museum treasures in the chaos that followed the 2003 Iraq war. The museum is still playing a key role in helping Iraq to recover its archaeological heritage.

Today’s Iraq, however, has not contributed to this exhibition – partly because most of the treasures excavated by German archaeologists from the site of the ruined city at the end of the 19th century are in Berlin, and partly because conditions in Baghdad are still too dangerous to allow much interchange of scholars and artefacts.

The museum team that put together the exhibition, led by Irving Finkel, the lead curator, is hoping to attract the large Iraqi community in Britain to the exhibition. More than 500,000 people saw the version mounted in Berlin.

Every schoolchild of my generation has heard of Nebuchadnezzar because of his capture of Jewish slaves during his conquest of Palestine (“King of the Jews, sold his wife for a pair of shoes . . .”). The Babylon Captivity became a central feature of the Old Testament, with the city’s downfall prophesied by Isaiah and Jeremiah and the condemnation in the Book of Daniel (who himself worked at the court of Nebuchadnezzar) of the king to spend seven years living as a wild beast. In fact, for Nebuchadnezzar, the sack of Jerusalem and seizure of Jewish slaves was only a minor incident in his wars of conquest and struggle against Egypt for supremacy.

But Babylon did not only give the world myths. It was here that an hour was first divided into 60 minutes, the months were named and many vital astronomical observations were made, including the methods of predicting the movements in the heavens. The Babylonians calculated the times for the risings of zodiacal signs, made nightly observations of the skies and recorded their findings so accurately that most of their astronomy formed the basis of later Greek scholarship and mathematics.

Saddam Hussein celebrated Babylon as one of the ancient treasures of Iraq, depicted it on his banknotes and tried to reconstruct in the desert many of its glories – not always successfully. But the Babylon of legend, which boasted two ancient wonders – its vast walls, as well as its hanging gardens – has outlasted not only Saddam but two millennia of demonisation. Now, perhaps, it can begin its rehabilitation within the walls of the British Museum.

Babylon: Myth and Reality, British Museum, London WC1 (www.britishmuseum.org 020-7323 8299), Nov 13-March 15

Editor's choice

• The 100 Best Films of 2009
• The 100 Worst Movies of 2009
• The 100 Best Films of the Decade