For nearly 400 years, Sebastiano del Piombo (1485-1547) has hung in the limbo to which very good but not front-rank artists are condemned. In the late-Renaissance race in Venice and Rome, he was always in third place.

He started well: by the time he left Venice for Rome in 1511, at the invitation of Agostino Chigi, a successful banker, the ambitious pupil was already beginning to surpass his masters, the then elderly Giovanni Bellini, and Giorgione – much of whose soft and diffused colour-technique he absorbed.

But Rome was a crowded scene for a new young artist. Michelangelo was two-thirds through painting the Sistine chapel ceiling, and Raphael, having completed the Stanza della Segnature in the Vatican, was painting his Galatea fresco in the palazzo on the Tiber, later known as the Farnesina, which belonged to Sebastiano’s new patron. Thus the newly arrived protégé found himself painting the figure of Polyphemus, who gazes down on Galatea, the nymph he can never reach, from a high corner in the ceiling, alongside his most feared rival.

The Sebastiano exhibition at the Palazzo Venezia is the first big show ever to have been devoted to the artist. Here is an astonishing series of works, divided into the three main periods of his working life – Venice, Rome and the Counter Reformation, as well as a fine selection of drawings (among them the preparatory drawing for Polyphemus) and a last room showing his influence on Spanish religious painting.

The decor, by Luca Ronconi, the opera and theatre director, adds to the drama of this show. He has transformed three of the high-ceilinged salons of the building into vast mono-coloured caverns – each lined with a brilliantly coloured velvet: emerald green for the paintings of the Venetian period, scarlet for the Roman works, and sombre grey for works of the Counter-Reformation period following the sack of Rome in 1527. The general effect would be gloomy, but for decorative shafts of golden light illuminating the walls. A separate lower, curving structure winds round the walls, into which the 40 paintings by Sebastiano are set.

One of the largest (at 208cm by 315cm) and most beautiful paintings in the show is “The Judgment of Solomon” (1506/8), hung strategically opposite the entrance, so that the rich oranges and yellows, and the Tintoretto-like mossy greens and dusky pinks, shine out of the gloom. The work was thought to be by Giorgione until 1903, when the art historian Bernard Berenson pronounced it a Sebastiano. It is unfinished, and though the two disputed infants are missing, the work loses none of its drama. Sebastiano’s grip on perspective, far stronger than Giorgione’s, comes into full play in the basilica setting.

Nearby, and dating from the same period, is “St John Crysostom and Saints”, where – unusually – the main saint is shown in shadow, and busy writing. Here, Giorgione’s influence is strong, particularly in the graceful, almost balletic John the Baptist, clad in a golden loincloth, who leans towards the central figure. Vasari saw the painting in the eponymous churchin Venice in 1566, and describes how “many who were not experts in art . . . believed the figures to be by Giorgione himself”.

Vasari’s biography of Sebastiano is somewhat censorious but fun to read. The painter is berated for procrastination and for laziness – particularly after he acquired the sinecure of Keeper of the Papal Seal in 1531 (this was made of lead, hence the artist’s nickname “del Piombo”).

However, he rightly identifies Sebastiano’s particular talent being for portrait painting. Vasari particularly admired his 1525 (Roman period) portrait of Anton Francesco degli Albizzi, and the “truly marvellous” rendering of the head and hands. But the conventional pose and self-importance of the sitter make this less interesting to a modern audience than his earlier (1512), supremely naturalistic “Man in Armour”, who, with his tousled hair, twisted torso and shiny armour, reminds one of Caravaggio’s later tours de force.

The most delightful portrait here is undoubtedly the “Portrait of a Young Roman Woman” (“Dorothea”) of 1512. Seen at half-length against a dark background, next to a window facing on to a landscape at sunset, the young woman turns and looks at us with a slight smile. Her right hand seems about to pull up the cherry-coloured velvet of her fur-trimmed cloak, which has fallen off her shoulder. The pose owes much to Raphael, but Dorothea’s somewhat calculating expression makes us think rather of Manet’s Olympia.

Sebastiano never got on with Raphael, but his relationship with Michelangelo was close for many years. Michelangelo certainly helped the younger artist with preparatory drawings: his influence can clearly be seen in the fine “Flagellation” (1525) – of which Sebastiano made a fresco version in the church of St Pietro in Montorio – and the statuesque Virgin in the Viterbo Pietà (1516).

The novelist Vladimir Nabokov was entranced by the “Dorothea” portrait, and wrote a short story, “The Venetian”, in which he describes Sebastiano Luciani (the painter’s real name) as a “dissolute monk”, without any suggestion that this may have affected the quality of his painting. Vasari was rather less willing to separate the life from the art. The Palazzo Venezia’s arresting exhibition suggests that the novelist was the shrewder critic.

Until May 18, tel +39 06 6819 2230. Exhibition then goes to the Berlin Gemäldegalerie, June 28–September 29