A decade ago, film-maker Pedro Almodóvar took a photograph of El Golfo beach in Lanzarote. When he got the pictures developed, he could just make out two tiny figures standing on the sand. Intrigued, he had the shot enlarged, and revealed a couple locked in a tight embrace, lost in the landscape.

The image, which he called The Secret of El Golfo, niggled away at him for years, eventually inspiring the story that would become Broken Embraces, his latest film, on general release here from 28 August. Although most of the action takes place in Madrid, the scenes shot in Lanzarote are crucial to the plot and set the tone for the whole film.

In Broken Embraces, the two main characters, Lena and Mateo, played by Penélope Cruz and Lluís Homar, stand on the same spot. He takes a photograph and Lena embraces him from behind, sheltering from the wind. I went to Lanzarote and stood there too.

Striated cliffs in shades of burgundy, russet and ochre frame a beach where wild waves crash on to the shore, with what looks like a slick of green paint splashed across the charcoal sand. It is the most extraordinary sight, and it is hardly surprising that Almodóvar didn't notice the couple.

"It was like in Antonioni's movie Blow Up, when David Hemmings takes the picture in the park and doesn't see the body by the bushes until he develops the film in his darkroom," said the director when I met him later in Madrid. "The camera lens sees more than the naked eye."

The beach is actually a volcanic crater eroded by the sea, and the green stain is a lagoon, linked to the ocean by lava tubes hidden under the sand. The colour comes from the algae that flourish in a peculiar ecosystem created by the high salt content of the water and the composition of the rock. If you sift through the stones glinting in the sunlight on the beach, you might find crystals of olivine, the green mineral used as a gemstone. But you have to be patient and look very carefully: like the embracing couple, they are not visible at first glance.

"I'd gone to Lanzarote shortly after my mother died," said Almodóvar, "and the colours of the island seemed to reflect how I was feeling. I found it somehow soothing - not just the blackness, more the soft tones of red, green and brown."

I drove away from El Golfo along a road flanked by huge volcanic boulders, and turned north into La Geria, the wine-producing valley that Almodóvar filmed from the air as the main characters drove across it in their red hatchback.

The slate-grey, gently undulating terrain is scored with thousands of shallow circular hollows, each housing a single green vine protected by a semicircle of basalt rocks. I got out of the car and gazed at the perfect pattern, which looked like an immense art installation. I half expected to see the land artist Richard Long trudging towards me.

"I was knocked out by La Geria when I first saw it and knew that I would use it in a film one day," Almodóvar told me. That was in 1985, when he went to Lanzarote to have a rest before shooting The Law of Desire. Back then, he stayed in a bungalow on Famara beach in the north-west of the island, which is where I headed next, as it is also a location in Broken Embraces

Since my arrival on the island, I had noticed that the very mention of Famara seemed to make people come over all dreamy and misty-eyed. I got the impression that it was the sort of place where people come for a week and never get around to leaving. The long, curving bay, backed by dusky pink cliffs, provides perfect conditions for surfing, windsurfing or kitesurfing, depending on the vagaries of the wind on the day. There is high-quality tuition on offer and professionals, including kitesurfing world champion Kirsty Jones, can often be seen training there.

In the film, Lena and Mateo stay, as Almodóvar did, in a bungalow in holiday village Bungalows Playa Famara. There are scenes in the reception area. When I walked in, I was a bit surprised to see that the receptionist was the person who appears in the film. "Pedro asked me to play myself," said Lyng Dyrup, originally from Denmark, who turned out to be the manager of the complex. "It was hardly a stretch, particularly as I've been here for more than 20 years."

Lyng told me that they had filmed in bungalow number two, in the row nearest the beach. I let myself into the semicircular building and found myself in the living room where one of the most poignant scenes takes place, with the couple on the sofa, watching television.

"This is where the title, Broken Embraces, comes from," Almodóvar told me. "They are watching Rossellini's film Voyage to Italy, in which archaeologists find the entwined skeletons of a couple buried by lava, together for ever. Lena cuddles up to Mateo, and he sets the camera and takes a photo of them, unaware that their bliss will soon be shattered - and the photo torn to shreds."

Back in reception, I asked Lyng what she thought of the film. "You need to see it more than once, because it has so many layers," she replied. "It's really more like a book than a film - a book you can't put down, because you are totally absorbed by the story and the characters."

I wandered down to the beach and watched surfers riding the waves, children flying kites and dogs dementedly chasing balls. The scene is remarkably similar to one near the end of the film, when all this carefree activity signifies an optimistic new beginning for one of the characters.

Earlier in the film, Lena and Mateo sit on the sand, framed by black rocks that shield them, like the vines, from the wind and the outside world. "Famara is a place of refuge, which is a key concept in the film," said Almodóvar.

César Manrique, the visionary artist, architect and environmentalist whose influence is seen all over the island, spent his childhood holidays in Famara and always said it was his favourite place. Born in Arrecife, the capital of Lanzarote, in 1919, he lived in Madrid and New York before returning to the island in 1966. Passionate about his homeland, he campaigned for the introduction of regulations that saved Lanzarote from the ravages of rampant development. Highrise buildings are prohibited and there are no roadside advertising hoardings.

He also designed a series of extraordinary buildings which accentuate the unique geology of Lanzarote and are now its main tourist attractions, as well as making funky wind sculptures to adorn roundabouts across the island.

"Lanzarote is like an unframed, unmounted work of art," he famously said, insisting that anything manmade had to be integrated into the landscape.

"Broken Embraces is a total homage to Manrique," Almodóvar told me. "I met him on that first trip back in the 80s, and he took me all over the island and showed me his Lanzarote."

Manrique's home at the time, Taro de Tahiche, is built into the boulders in a lava field. He was so amazed to spot a fig tree growing up from the blackness that he decided to build a house around it. Now a foundation dedicated to his life and work, its ground floor is an exhibition space with works by his renowned contemporaries, including Tàpies, Millares, Picasso and Saura, but it is the view framed by the huge windows that draws the eye. Basalt steps lead down to a turquoise pool and five lava bubbles linked by passages in the volcanic rock. It looks more like a groovy nightclub than a home. "Oh yes, I went to some pretty wild parties there," remembered Almodóvar, laughing.

Manrique died in 1992, at 73, in a car accident at the roundabout next to Taro de Tahiche, which features one of his wind sculptures. Almodóvar used the same roundabout for a crash in Broken Embraces, but was unaware of its sinister connotations. "I chose it because I loved the sculpture on it, and it was only afterwards that I read in the local newspaper that Manrique had died there."

Almodóvar said that it was one of many strange coincidences that happened while they were filming. "There was a special atmosphere on the shoot. Everyone involved said they felt a really positive energy - and believe me, that is not always the case. And the whole crew said they had never slept so well, including me." I agreed with him on that. The day after I arrived, I woke to the distant sounds of a donkey braying and a cockerel crowing, feeling totally refreshed. I hadn't slept so well for years.

I was staying at the Finca de Arrieta, an eco-retreat on the north-east coast, between the mountains and the sea. The small complex, built in the local basalt stone, is so low-rise it is barely visible from the coast road, its existence given away only by the palm trees blowing in the breeze. As well as a cottage and a villa, there are three yurts, all with a sort of Moroccan/Indonesian feel. My yurt was a sumptuous structure lined in pink silk with a marble floor, and a wetroom and kitchen just outside. I made a pot of coffee and an omelette with organic eggs from the finca's chickens and huge spring onions from the garden, before having a swim in the solar-heated pool.

This mini paradise was created by Britons Tila and Michelle Braddock, who live here with their four children. "We have 30 solar panels and two wind turbines, which provide energy for the whole finca," said Tila. "Lanzarote has plenty of sun and wind, and there's no reason why the whole island shouldn't use renewable energy sources."

Manrique would be proud, but at the moment Finca de Arrieta is the largest sustainable energy project on the island. We were having dinner right by the sea on the terrace of the Amanecer restaurant in Arrieta, the village just down the road. As we devoured sizzling prawns, Tila pointed out a romantic-looking little cottage a couple of doors away, which they also rent out. "Being so close to the sea, you can fish out of the window if you want. We put a solar panel on the roof there too," said Tila, dipping fried goats' cheese into the mojo dips which are traditional throughout the Canaries. "The green one is made with coriander, and the red one with paprika," said Michelle, topping up our glasses with Bermejo, a delicious local white wine.

The next morning, Tila whisked me off on a tour of the north of the island. We drove high into the hills, through lava fields covered in lichen in soft shades of gold, green and cream. On our left was the Monte Corona volcano, and standing alone on the hillside below it was La Torrecilla, the large house that is used as a clinic in Broken Embraces

A lava tube runs from the volcano to the sea, billowing out to form caves along the way. In one of these, Manrique created Los Jameos del Agua, a massive grotto that contains a recently restored auditorium, where Broken Embraces had its first screening. "The acoustics there are amazing," Almodóvar later told me.

At the northern tip of the island, Manrique turned an old gun battery on the edge of a cliff into a restaurant and observation point, the Mirador del Río, where the bar has a curving panoramic window with views across to the island of La Graciosa. Almodóvar did shoot a scene in this dramatic setting, but it didn't make the final cut.

"We organise an annual charity event, the Tres Islas," said Tila, "when teams swim from La Graciosa over to Lanzarote, climb the cliff near here, then cycle the 60km across the island before sailing across to Fuerteventura."

The road wound to the south and we drove towards Haría, where Manrique lived for the last few years of his life. Hidden in a lush valley and surrounded by palm trees, it is one of the prettiest villages on the island. We stopped for lunch at La Frontera, a popular family-friendly restaurant with views down the valley, and ate chunks of aubergine with palm honey, and tender lamb chops.

Later on, Tila dropped me off at El Aljibe in the remote village of Los Valles, where I was going to spend my last night. From the outside, it looked like a traditional Canarian farmhouse, albeit a rather chic one. Inside, however, a staircase led down through an archway into an enormous stone space with a vaulted ceiling and mezzanine sleeping area. Originally the underground water cistern for the farm, El Aljibe is now stylishly decorated with paintings and sculptures by renowned local artists, all friends of the owner, who was also close to Manrique and worked with him on some of his projects back in the 70s.

Sinking into the outdoor Jacuzzi in this incongruously glamorous setting, my mind wandered to the amazing parties you could throw there - but you would need both Manrique and Almodóvar on the guest list to really make it swing.

Essentials

Iberia (0870 6090500; iberiaairlines.co.uk) flies to Lanzarote from Heathrow via Madrid from £166 return. Thomas Cook (flythomascook.com) flies from six UK airports to Lanzarote, from £96 return. Cachet Travel (020 8847 8700; cachet-travel.co.uk) features boutique hotels on the island; a week at La Casona de Yaiza costs £585pp in September, including flights and car hire.

Cesar Manrique's home, Taro de Tahiche (00 34 928 843138; fcmanrique.org) is open daily; entrance €8, under-12s free. Los Jameos del Agua (00 34 928 848020; centrosturisticos.com) is open daily and from 7.30pm to 2am on Tuesday, Friday and Saturday; €8, children €4. Mirador del Río (00 34 928 526 548; centrosturisticos.com) is open daily; adults €4.50, children €2.25.

El Amanecer is on La Garita beach in Arrieta (three-course meal with wine about €20). Mesón La Frontera is on the edge of Haría (Casas de Atrás 4; 00 34 928 835310).

Further information from the Spanish Tourist Office on 0870 8506599; spain.info.

Five fabulous places to stay

Finca de Arrieta

The estate of Finca de Arrieta comprises an eco-villa sleeping eight and large yurts sleeping up to four. The yurts have marble flooring, original hardwood Mongolian furniture and an ensuite bathroom. Arrieta is an eco-retreat, where the yurts and other properties are run on solar and wind energy, and holistic therapies, spa treatment and art courses are on offer.
• Yurts from €575 a week; 00 34 928 826720; lanzaroteretreats.com
Finca de las Salinas

This eccentric-looking rose-coloured finca in the picturesque town of Yaiza has 19 comfortable rooms. Although it's just a short (10km) drive from the beaches, the inland location gives the hotel a peaceful feel, and there are bicycles to hire. The hotel has two restaurants - a bodega with an impressive selection of Spanish wines, and a more formal restaurant. A full-service spa is opening this summer.
• Doubles from €104; 00 34 928 830325; fincasalinas.com

Finca Malvasia

There are just four small apartments at Finca Malvasia, which lies in the heart of La Geria, Lanzarote's spectacular wine region. Built from volcanic stone, the rooms are stylishly furnished with well-equipped kitchens, and private terraces with stunning views. The apartments are set in gardens full of fig and avocado trees, and there is a good-sized pool, yoga room and mini-gym, with massages available on site.
• From €110 per night for two people; 00 34 928 173460; fincamalvasia.com

Famara bungalows

Located between the stunning beach at Famara and the high cliff, these bungalows have private terraces. Sleeping two, four or six, they sit in a large garden with a communal pool. The village of Caleta Famara is a short walk away.
• From €60 a night for a two-person bungalow; 00 34 928 845132; bungalowsplayafamara.com

El Aljibe

This converted water tower is a spectacular bolthole for two; the exposed brick walls and vaulted ceiling create a dramatic backdrop to sleek modern furniture and a mezzanine sleeping space. The apartment has a surround-sound stereo system that makes the most of the property's incredible acoustics, satellite TV, outdoor Jacuzzi and pool.
• From €160; 00 34 902 363318; rural-villas.com

• Broken Embraces has its UK Premiere on Thursday at London's Somerset House