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GLASHÜTTE, Germany — Globally the luxury watch industry is in crisis. But somehow this village in an isolated corner of eastern Germany, with an economy totally dependent on watchmaking for the last 170 years, is thriving.

Unemployment is less than 5 percent. Mayor Markus Dressler reluctantly turns away companies that want to move to Glashütte. The village, with 1,800 residents, is squeezed into a bucolic but narrow valley and there is no room for new buildings. Glashütte has no hotel because no one has been able to find a place to put one.

One big reason for Glashütte’s prosperity is found in a renovated train station where Uwe Ahrendt first kissed a girl. Mr. Ahrendt, a Glashütte native and fifth-generation watchmaker, is chief executive of Nomos, whose minimalist, relatively affordable designs have helped Glashütte to float above the crisis afflicting its Swiss competitors.

Nomos has turned Glashütte’s former train station into a headquarters and manufacturing center. “This used to be the ladies’ rest room,” Mr. Ahrendt said as he led a visitor through a narrow space now filled with machinery.

Nomos is emblematic of the renaissance in fine watchmaking that has taken place in Glashütte since the fall of Communism in 1989. Today the valley is lined with nearly a dozen high-end makers of mechanical watches and chronometers, each with its own renaissance story.

The town’s focus on watchmaking is impossible to overlook. Glashütte is at the confluence of two fast-moving rivers, the Müglitz and Priessnitz, which pass through two steep valleys before they converge just below Nomos’s headquarters. The narrow corridors between the valleys are lined with watchmakers, their logos prominent on the factory facades.

They include A. Lange & Söhne, a unit of the Swiss luxury group Richemont, and Glashütte Original, a unit of Swatch Group. The village also has a watchmaking museum and a school that trains master watchmakers.

On a recent day the streets were mostly quiet and deserted except for a few tourists. Though it is a factory town, almost no sound emanates from the Glashütte factories. Most of the work is done by master watchmakers hunched over tables of miniature components, wearing magnifying eyepieces or peering through microscopes as they finish and assemble the mechanical movements by hand.

Last year, when exports of watches made in Switzerland dropped 10 percent, Nomos’s sales grew 25 percent. And that was an off year. From 2010 to 2015, Nomos registered annual growth of more than 30 percent.

The watchmaking industry in Glashütte employs about 1,800 people, more than it did during communist times. That is a rarity. East German factories often were overstaffed and inefficient, and survived the transition to a market economy only by making draconian job cuts — if they survived at all.

Measured by numbers of watches produced, Nomos is the largest of the companies responsible for reviving Glashütte’s luster as a center of fine watchmaking. A. Lange & Söhne, located just across the street, has the longest tradition in Glashütte, and the largest revenue in monetary terms because of the high prices its watches command.

Glashütte’s limited space — in much of the town the sloped terrain allows room for only one street — has a clear benefit for the watchmaking companies already established there, which include Moritz Grossmann, Tutima, Wempe Glashütte and Bruno Söhnle. It helps to preserve their products’ exclusivity as, by law, watches cannot label themselves as made in Glashütte unless at least 50 percent of their components, measured in terms of their value, are produced locally.

The town’s watchmaking tradition goes back to the mid-1800s when Ferdinand Adolph Lange began manufacturing watches there with financial support from local nobility anxious to create work for impoverished local people, who had little means of support after silver mines in the area were tapped out.

Other watchmakers followed and by the beginning of the 20th century, the town had acquired a worldwide reputation for its quality and precision work.

But after World War II the watch companies were expropriated by the Soviet-supported regime. The town continued to produce watches, but they were cheaper quartz models exported to West Germany to earn hard currency.

After the fall of the Iron Curtain, A. Lange and other fine watchmakers began to return, and found a market among aficionados of fine watches for whom the name Glashütte still had mystique.

Nomos was one of the pioneers of the renaissance. The company was founded in 1990 by Roland Schwertner, a fashion photographer and computer expert with no previous experience in watchmaking. As a boy, Mr. Schwertner had spent summers with an aunt and uncle who lived near Glashütte and they often took him there to buy ice cream.

Only months after the demise of the East German regime, Mr. Schwertner bought the moribund Nomos brand name from a government agency, known as the Treuhand, which administered assets that had belonged to the state.

Mr. Schwertner discovered that there were still some master artisans around who possessed traditional mechanical watchmaking skills, and could teach young people. Nomos’ first model, the Tangente, introduced in 1992, sold for a relatively inexpensive 980 deutsche marks, or what would have been about $575 at the time.

The Glashütte watchmakers have been buffeted by some of the same forces as their Swiss rivals, including competition from the Apple Watch and a slump in demand from Asia.

But they say they have fared better because they were less dependent on the Asian market and suffered less when the Chinese government’s anti-corruption drive dampened sales of luxury goods. Germany is the biggest market for most of the Glashütte brands, followed by the United States.

“Because the Asian customers hadn’t discovered us yet, we were not so affected,” said Alexander Philipp, director of sales and marketing at Tutima, a watchmaker next door to Nomos that specializes in timepieces based on those used by pilots in the German air force.

Tutima’s top watch, a platinum version of its Hommage model, sells for 179,000 euros ($210,825). Master watchmakers, sitting at varnished wooden desks in Tutima’s workshop, take four months to build just one watch, which has 550 parts.

Nomos has done particularly well during the crisis because its products are inexpensive compared with others. Entry-level Nomos models start at about €1,300. The priciest, made of gold and assembled by a single watchmaker, sell for about €16,000. (Tutima also has models starting at less than €2,000.)

While watchmaking has brought prosperity to Glashütte, it also has made the town vulnerable to the whims of the luxury goods market. That worries some people. “If I could dream,” said Mr. Dressler, the mayor, “I would wish for another industry with a different economic cycle.”

Though the watchmakers have greatly expanded the town’s tax revenue, some citizens resent their monopoly of the economy and the real estate shortage that they have created.

Mr. Dressler won re-election in 2016 but only by a narrow margin. A local political movement calling itself Zeitlos, or Timeless, which complained that the watchmakers have crowded out the village’s community life, challenged him. One of the group’s demands was that a flood-damaged swimming pool should be rebuilt in the village center. Mr. Dressler argued that there was not enough space at the original site for a pool that met modern standards, and favored a location further up the valley. The issue still has not been resolved.

To the watchmakers, Glashütte’s total focus on the craft of watchmaking is part of what makes people willing to spend thousands of euros, even tens of thousands of euros, on a device that does nothing but tell the time.

“In Glashütte,” Mr. Philipp said of Tutima, “you’re in the cradle of watchmaking.”