Digital technologies are reshaping traditional static urban typologies, as the museum, urging a rethinking of how Cultural Heritage (CH) is experienced. The work presents the PALIMPSEST Project, an Interreg V-A Greece–Italy funded project, which proposes a dynamic, interactive, participatory, and personalized museum experience in the urban context of Ioannina, Greece, establishing an open-air, immaterial, immersive museum route in the city. The project’s innovative approach involved three methodological stages. In the first stage, a collection of past stories of the city was achieved through transgenerational collaboration of students and older generations. In the second stage, the collected material was organized to create an interactive mobile app, allowing users to access existing and add new stories, fostering bottom-up development. In the last stage, a museum experience was built around interactive installations from selected stories through co-creation processes and dispersed throughout the city’s public space, activated by the visitors via the app. PALIMPSEST established a hybrid, open-air museum route, connecting the ICH with the urban landscape, and creating personalized and unexpected experiences of the city. The project offers a novel way to reconceptualize the museum by integrating digital technologies, arts, storytelling, and active participation, bringing the museum into the open urban space.