A decision reached almost 1,700 years ago by Constantine the Great is a source of inspiration to any who despair of lasting religious tolerance in the world. On the eve of an improbable battlefield triumph in Rome, AD312, the young Roman emperor saw a vision of Christ and converted to Christianity, joining the ranks of those who had been persecuted by his predecessors for centuries.

Most self-respecting emperors would force their subjects to follow suit - so what was he to do? Constantine's answer arrived in the edict he issued at Milan the following year. "I grant both to Christians and to all men, freedom to follow whatever religion each one wishes," it stated. His words were the touchstone of modern Christianity, ending centuries of persecution for Christians. But they are also the first known articulation of religious tolerance, permitting the co-existence of Jews, Christians, British Pagans and those who worshipped the traditional Roman gods such as Eros and Jupiter.

The modern Church's debt to Constantine, who also introduced the architecture on which the St Peter's Basilica in Rome and Jerusalem's Church of the Holy Sepulchre were later built, is recognised in one of the most important Roman exhibitions staged in Britain, which opens tomorrow in York.

"Constantine the Great, York's Roman Emperor" marks the 1700th anniversary of his coronation in the city and is staged in association with the British Museum, which has loaned scores of artefacts. The exhibition is designed by Ivor Heal who, with finely carved sculptures and cameos and brilliantly coloured mosaics, recaptures Constantine's lavish Roman world with the same panache he showed in the Royal Academy's two huge successes The Aztecs and The Three Emperors.

Only Augustus Caesar, the first Roman emperor, rivalled Constantine's achievements in a reign that lasted until 387, according to Elizabeth Hartley, the exhibition's creator.

He rescued the failing empire, continuing work started by his father, Constantius. But he also reinvented the empire. He restored peace, stability and security by promoting harmony and tolerance, abandoned Rome to establish a more easily defensible capital at Constantinople. "He created a new world without upsetting the old and creating conflict," says Ms Hartley.

York, which erected a statue to Constantine outside the Minster in 1998, cannot be accused of underplaying its part in the story of the great emperor. In addition to the exhibition, which includes exhibits from 36 museums and private collections from across Europe, it will stage a service of commemoration at York Minster on 25 July - the 1700th anniversary of Constantine's proclamation here, and will stage a three-day international conference on the man in the same month.

Yet the city's important role in the emperor's story presented itself by chance. Constantine was far away at Nicomedia in the east of the Empire, being trained to accede to his father's position as one of the caesares (junior emperors), by Diocletian when news arrived that Constantius was facing a spot of bother from the Picts, in Scotland. Constantine headed west, met his father at Boulogne, crossed to Britain before winter set in and proceeded into a battle, which they won. Both then returned in December 305 to York - then called Eboracum, one of the regional capitals and home to the Romans' northern military command.

No one is sure why father and son lingered in York but they were still there on 25 July 306 when Constantius died. With the support of troops stationed at York, Constantine took the throne, possibly in a service held at the city's imperial residence. Coins issued for his imperial visit suggest he returned to York at least once in the first 10 years of his reign and he described his coronation there in a handwritten testimony, fragments of which are on display at the exhibition.

It seems he may also have ordered a rebuilding of the Roman northern command HQ in York, at the spot where a magnificent head of Constantine was unearthed in the 19th century. It too is being exhibited.

The event which was to assign Constantine his part in Roman history occurred in 312 on the eve of the Battle of Milvian Bridge on the outskirts of Rome which, if troop allegiances were anything to go by, Constantine was expected to lose. In a dream, Constantine saw the Chi-Rho - the Christian symbol that combines the Greek letters X and P (the first two letters of the name of Christ) in front of the sun with the words "in this sign you will conquer". He was told to paint this sign on the shields of his soldiers and, after doing so, won the battle.

Whether Constantine really had the dream or invented it as a shrewd political move to endear him to Christians and win support is a matter of enduring conjecture.

Boris Johnson, the Tory MP, a huge enthusiast on the subject of Constantine after coming across him during work for his BBC series on the Romans, has some suspicions. "It may have been a stunt. He was a supreme political operator and the conversion might have had its advantages. It's difficult to establish," he said.

Perhaps Constantine's mother, Helena, played a role in the conversion. She was probably born a Christian, though virtually nothing is known of her background, save that her father was a successful soldier, a career that excluded overt Christians. Either way, Constantine immediately granted restitution to the Christians, creating an unprecedented tolerance of the previously minority religion, and initiated the building of a Christian basilica at the Lanteran in Rome, the first Christian church. The emperor also legislated Sunday as a day of rest, banned gladiatorial games and promoted Christians to high office. At the Council of Nicea in 325, he saw to it that Christianity was fully legalised in the empire for the first time; a move considered integral to the development of the religion. The Nicene Creed, still used by Christians as the fundamental expression of their faith, also emerged from that council. Constantine's reputation as the "first Christian emperor" has been promulgated by historians from Lanctitius to the modern day, though he was only baptised on his death bed.

Constantine's pursuit of tolerance may have stemmed from his time in Diocletian's court, before he met up with his father in Britain, Ms Hartley believes. "He saw persecution under Diocletian and its disastrous consequences and was probably very distressed. By contrast, there was almost no persecution in his father's western empire."

York's exhibition provides a true sense of the creative power which Constantine's endorsement and appreciation of new modes of thought unleashed. He modelled himself on both Augustus and Alexander the Great - a clear expression of his determination to be one of the great figures of history - but ushered in a golden age of creative, Byzantine arts while allowing the classical traditions to continue. Among the more memorable examples on display at York are a youthful head of Mithras, never before loaned from the Museum of London; a collection of wall mosaics recovered in the 1970s from Roman villas in Dorset, and a mosaic illustrating Ovid's Metamorphoses, recovered in Somerset. There are sculptures, textiles, silverware, games, weapons, coins and jewellery - all reflective of the magnificence of the emperor's age. Few examples of the artistic endeavour that Constantine helped create have been located by archaeologists in York, though one of those in the exhibition is an extraordinarily well-preserved bun of auburn hair with two hairpins intact.