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The Swiss architect Peter Zumthor has spoken of architectural atmosphere as "this singular density and mood, this feeling of presence, well-being, harmony, beauty" that some buildings embody well.

People on the trail of the perfect house, or who think about architecture at all, are always on the look-out for such atmosphere. And, indeed, one occasionally finds this sense of belonging and homecoming in the single-family homes and even in the residential high-rises we visit. But when we do discover it, the atmosphere is rarely delivered with more tact and clean, quiet grace than I experienced last week in a new house in the South Hill neighbourhood in midtown Toronto.

The dwelling was designed for a young family of five by a team at Atelier Kastelic Buffey (AKB), a local architectural and design firm whose principals, as it happens, have been studying and learning from the work of Zumthor for several years.

They definitely know a thing or two about creating atmosphere.

The exterior geometry of this two-storey, 7,000-square-foot house is plain and clear, composed of a pair of simple oblongs stacked, one atop the other, on a rectangular city lot. The spacious, elegant gestures of the street-side façade, which is clad in large, smooth slabs of Indiana limestone, make the building look as if it had been sculpted from massive blocks of rock.

Yet there is nothing ponderous about AKB's outside treatment. Wide, deeply recessed horizontal windows open the interior to light, and a tall window by the front door frames a view that carries the eye right through the entry level, through floor-to-ceiling glass walls at the rear, and into the back garden. Without turning the structure into a transparent modernist box – something the clients did not want – AKB made it permeable, and they have banished the heaviness that might have come from using so much stone on the exterior.

The statement made by the building's front is somewhat retiring. Designers Kelly Buffey and Robert Kastelic told me they pulled back the boldness of the exterior out of respect for the other houses up and down the street, which tends to be populated by Tudor, Georgian or eclectic Edwardian pastiches. While they probably should not have bothered – those storybook dwellings can take care of themselves – this move has not made the façade timid or hesitant. It stands up for itself, as a refined instance of modern abstraction.

No such contextual constraints shaped the interior, of course, so AKB (and the office's design collaborator, Ashley Botten) could do the tailoring entirely according to their own (and their clients') taste. The attractive mood inside – calm but alert, gracious without fussiness, minimal without any stinginess at all – is generated by a scheme that modernism has made seem timeless. There are tall white walls, warm oak floors, sparse but well-chosen contemporary furnishings, and a dramatic, oak-framed staircase that rises from the double-height foyer and is brightened by a large skylight.

No visible supports or bulkheads interrupt the flow of space on the ground level, since all the framing and electro-mechanical innards of the house have been hidden away inside walls and the extra-wide intervals between floors. But AKB has avoided the spatial blankness that sometimes makes open-plan interiors seem vacant, unlived-in, by lightly defining each area unto itself. The living room ensemble, for example, occupies a sunken, inward-looking, intimate place, while the dining table stands in an elevated, more exposed position near the entrance hall. The separation of these zones is subtle, but aesthetically effective, and the interior sings.

What's remarkable about this house, however, is its simultaneous success as both an contemporary artistic entity and as a flexible, accommodating home for a couple with three small and active children. The couple wanted a skylit entrance hall where they could entertain, for example. But how to keep it clear of every family's usual mess of mitts and coats and boots? Just an oversized closet would not do, so AKB installed a full room off the foyer (camouflaged as a closet) with cubbyholes, hangers and cabinets for everyone's gear.

In the basement, in addition to the obligatory family room, AKB has put an ample, hard-surfaced compartment dedicated to nothing but kids' crafts. In the living-room area, the television screen is hidden behind a dark, sliding steel screen. The kitchen seems eerily bare because all the appliances and dishes are so deftly tucked away. Throughout the house, it's the same story everywhere: storage, and more storage, and concealment of everything that can be concealed.

The result is a dwelling that is as efficient as it is handsome. It communicates the "presence, well-being, harmony, beauty" of all solid residential architecture (in whatever style) that's worthy of our attention.