If that were my bedroom, I think I would ceiling mount a white semi-sheer curtain (like on hospital track) just on the bedroom side of the half walls.

I think that would keep the open feeling, and you might leave them open unless you have guests over. If you're renting however, that might not be allowed?

You mention you have a downstairs. Without pictures it's impossible to know if the solution lies in switching rooms i.e., downstairs sleeping quarters and upstairs living space. I assume, however, that if it was that simple a solution you'd have utilized it already.

On another note, I envy (in a swoon worthy way) your patio space.

Agree with above comment. Last week there was a post about curtains and they linked to some past posts showing how to do this divider effect with basic wire and a system that a renter could do and remove and easily patch.

Can't quite get the layout - but you could bolt narrow open bookhelves on the half walls ( to be removed and holes puttied on moving) with a filmy curtain strung betwen them. Gaim has relatively cheap portable bamboo screens. Surround your bed with open bookshelves which would give a feeling of privacy.

Could you do something at waist height or thereabouts, to keep the light and keep the space open, but also create a division? Not sure what, perhaps a sliding gate at the top of the stairs, or a narrow console table between the stairway and the bed?

Perhaps something like blinds or shades mounted on the ceiling and only drawn when guests are over?

A curtain is probably your best solution, but if you don't want to go that route, maybe a nice folding screen in front of the opening to the space would be a good way to add a little privacy so people won't think it's a public space.

I would hang a stained glass square or sheer panel from the ceiling above the half walls. It would only offer minimal privacy, but at least it would distract a little.

From the pics, I'm having a hard figuring out how the two spaces relate. A layout would be tremendously helpful for posts like these.

I agree with the semi-sheer, floor length curtain suggestion. They can be pulled closed when you want to keep your bedroom off limits and pulled open when it's just you. In fact if they were swagged back with some kind of decorative curtain rope they would define and frame your bedroom area very well.

And, er, speaking of curtains - I don't think that curtain bunched in the middle of your bedroom is doing you any aesthetic favours. Either individual blinds for each window or else one curtain swept back to each side would look much better.

Assuming that you're renting, and with a nod to the futon style bedding, have you considered the good ol' fashioned room divider, or Shoji Screen, a la what you might see on the following website:
http://www.orientalfurniture.com/shoji-screens.html
If you own it, the sheer curtain concept seems quite cool, although semi-sheer panel curtains (not unlike Ikea's ANNO range) might give more structure to the see through airiness.
And seconding Stationeryfiend's observation, some blinds would really help that space.
Best of luck!

@fuzzyegg: I think I understand how the layout works - the stair comes up in the middle, dividing the two sides. To the right is the bed area, to the left the desk area and patio. I haven't quite figured out what the other half-wall (in front of the stairs) is doing - perhaps it opens to the lower level?

As for what to do about the room divider, I agree with those who suggest curtains. Big, dramatic curtains on either side of the entry to the bed area would really frame it nicely, and could be closed when you have guests over and also when you want to block out light and sleep in on a Sunday morning. I think with the right curtains it would separate the space well enough that you wouldn't really even have to close them when you have guests over.

Sheer curtains, floor to ceiling, wall to wall, left open in the doorway except when entertaining...
Bead Curtains over each of the half walls...
Openwork lacy screens over the half walls, maybe bamboo or rattan...
Big vases of tall branches, bamboo, silk flowers, or other decorations (probably two on each half wall, all the same) acting as decorative screens...

How about a fabric/scenery drop that goes full height to the ceiling? Think drama/stage production quality.... you may even be able to find a used one and have it cut down to size for your space. It would give your bedroom space privacy and a visual block for guests coming upstairs - they wouldn't have to see dirty socks on the floor, and you could have it open when it's just you at home if you feel that it blocks the space, but the key is to go for drama and it'll keep people admiring it from the side that you want them on and out of your personal zone.

Personally I don't like the idea of a sheer curtain or blinds or anything hanging in the middle of the room. Just seems odd in a small room, and people would find their way around it - not enough of a barrier. I would roll up the futon so it's out of the way when people come by.
When I had a studio and tried to entertain, that is when I realized that I should invest in a good, modern sofa bed.

I'd just be sure to make my bed before entertaining, and not worry about it.

I am saying this in the nicest possible way: have you considered how you might not mind people seeing your room if it was a little nicer up there? All I see right now is a weird centre curtain that looks like it wouldn't block either window, and a futon mattress on the floor with an open sleeping bag for a blanket. Without putting curtains up there's not a whole lot you can do if you want to keep that open airy feeling, so I would suggest putting a little more work into the room itself so you feel better about people seeing it. It doesn't have to be expensive - when I was starting out my whole apartment was furnished by craigslist and the occasional piece from Ikea (and frequently, Ikea from craigslist - the cheapest option going!) A bed frame, a mirror on the wall, a target bed-in-a-bag, a few personal touches - you could go a long way on a tight budget. And September is a great time of year to do so!

Too difficult to tell. A couple more perspectives might really help. In the meantime, a past Ikeahack that I read about has worked wonders in my apartment for semi-private room dividing. Take any roll-down blinds, decorate the bottom of them, then you can always pull them up, as if revealing a window. Use two or three for multi-tiered room dividing. When you want more light or whatever, you can just pull the chain and they roll all the way up!

Personally, I love bead curtains. If this were my space, I would hang bead curtains in the space between the bedroom and the terrace. This would allow light into the bedroom while still creating a private space. (Since there isn't a photo from the bedroom to the terrace or vice versa, it is harder to imagine what the space's issue is.)

Murphy bed?

I have LOVED this look since I first saw it on the Brick House. http://www.the-brick-house.com/2011/05/rope-wall/ I think you could easily make this semi-permanent with minimum effect on the walls or ceiling. It would also keep either room from feeling too small.

I'd also go for a ceiling mounted sheer curtain.
However, I'd center your bed in the middle of the room with your feet towards the windows.
The sheer curtain would be where a headboard would be.
The sheer curtain would be sandwiched between your bed and a long-low credenza that has shelves/drawers facing the stairs. So then you have a bit of storage space and it obscures your bed.

Ikea has a wire curtain rod that I would hang right by the walls, and then I would rig up some sort of system to tie or clip the curtain up to the ceiling when it's not in use.

Otherwise it's hard to tell if you have space but I would put one of the large Expedit shelves floating in the middle of the room to block off your space a bit. So you would walk around the shelf to get to your bedroom area (assuming you don't live someplace where bookshelves need to be bolted to the wall due to earthquakes).

On the other hand, you could embrace it and set your bed up as more of a day bed and create extra space for when you are entertaining. When I had a studio, I had a sleeping comforter and then a bed spread that I used when people were coming over, so it didn't feel as much like people were sitting on my bed. I switched the pillows out too.

You aren't going to be sleeping there when guests are over, so you don't actually need privacy as much as you need to have your personal belongings hidden or for guests not to feel like they are in a bedroom.

Futons are very uncomfortable and unless you get an extremely pricey one, they screem college dorm. If you can afford a furniture piece, I would go with a traditional day bed and add the appropriate pillows and cushions to make it appear as a sofa. Some day beds have trundle beds that pop up, but if you go for an older retro one, they are slightly shorter than a twin. Then, I would get a night stand/end table with lots of drawers and also use a few decorative storage cubes, etc., or an armoire. It would look like an extension of the home office rather than a bedroom.

The curtain or screen idea would be good because you could put it up when you actually need privacy and then fold the screen aside, etc.

If you want semi-privacy, how about glass bricks (on both sides) on the half wall up to the ceiling to allow light to still enter the room. In the open space (in the middle), you can use a very long curtain that can be kept open or closed when you want that space kept private. You can also turn your bed and set up right under the windows. Lots of cute pillows etc. Add curtains on each side of the windows for more drama. I think it would be super cute!

Another idea (assuming that there's space to re-orient the bed so that your feet face the windows) is to get a headboard/tallish half-wall made that would be tall enough to block people's view of your bed so that when they come upstairs all they'd see is the view out the windows and not look down to see your mattress. If the ledge at the top of the headboard/tallish half-wall is wide enough it would also give you a surface for plants or collectibles that would distract from people thinking 'Bedroom' on their way up to the terrace.

I'd do curtains wall-to-wall on the bedroom side of the half walls, which you can close when you have guests, or leave open when you don't. Then, so the half walls don't look awkward from the patio when the curtains are closed behind them, I'd put some open shelves on top of the half-walls and use them for decorative objects (OK, nicnacks) that look good from both sides.

I agree that you may not need any divider in the space at all. It is a nice airy open space as it is, there is no reason to hide/obscure it from guests. I would center the bed under the window, and invest in nice curtains for those windows. Then you could use the wall your bed is currently on to place your dresser and hang some nice artwork above. A little rearranging and your bedroom will be a nice place that your guest will look on with envy (though I already do!)

I guess I don't get the logic of this question. I assume you're never going to be trying to go to bed while you have guests on the patio, so why is privacy needed? The futon is shy?

I agree with the what-the-hell-is-wrong-with-you crowd. My advice is to stop being so neurotic and, if you're still mortified that someone might see your shameful futon as they pass by the room, just make the bed and do a quick tidy when you are expecting guests.

Also, get a proper bed, perhaps with the money you'd earmarked for your Shame Screens.

Seriously, unless you regularly entertain the Puritan Ladies Temperance Guild from 1872, no one is ever going to say, "Luna put on a wonderful brunch last week. It's such a shame that it was all ruined for me when I saw her bedroom for five seconds".

I'd get a four poster bed,some gorgeous cherry wood shaker style,with unbleached muslin curtains and just close them when you had company.Or maybe get some of those clear fiberglass panels with the real leaves and grass embedded,still lets in plenty of light but visually distracts the eye.

If you are in the process of buying a bed then I would just get one with a high-ish headboard and push it so the foot is against the windows and the headboard hides the actual bed. Nordli, Nyvoll, and Malm are some good ikea choices.

A cabinet (think Japanese) or platform of some sort for that futon mattress would go miles to making the area look less like you're squatting in your apartment. I like Parnassus' idea of a sofa bed, and it'd be seating for 2-3 more guests. Put a nice old trunk in there as a coffee table/ bedding storage, and you've got a multiuse room.

Why hide what you can celebrate? What a fun space. I had a futon after grad school that I wanted off the floor. I created a hanging bed with four (white) palettes and four large eye screws on the corners. The bed was suspended from the ceiling studs with a thickish rope on each corner. It was simple and beautiful, easy to sweep under and gave you the feeling of falling asleep on a yacht. I can picture it hanging right in the middle of your room (at the level of the window cross beam) like an extention of your patio atmosphere. Hammock meets porch swing. (Jeez, it was cheesy but I even strung fairy lights around the ropes -- such fun 20 years ago..:)

If you still want to section off the space you could hang a mosquito net around the hanging bed or reclaimed windows or some carved wooden panels from a folding screen turned sideways over the half walls (this is how I screen off my current loft space -- for both privacy and air circulation).

Course a daybed and a trunk'll do it too.

How about a large folding screen? You could use it as a headboard most of the time and just move it to block the view from the stairs when you are entertaining.

Use the half walls to either find some nice tall plants to flank the sort of open doorway you've got to that area, or hang two large frames on each side with some interesting glass above the half walls. Fabric and beads would work, but I'd recommend something more sturdy looking since you already have walls that frame the space.