Rapunzel, Battersea Arts Centre, London <!-- none onestar twostar threestar fourstar fivestar -->

Kneehigh, the Cornwall-based theatre company, is much in demand by the top brass these days. Their darkly delightful, left-field version of Shakespeare's Cymbeline, commissioned and co-produced by the RSC, was recently seen in the Complete Works Festival at Stratford.

For the National Theatre, which joined forces with them for their tragi-comic take on the myth of Tristan and Yseult (presenting the story from the perspective of the lesser folk who had to mop up after the self-absorbed lovers), they will next year devise a distinctive re-working of the classic 1946 Powell and Pressburger movie A Matter of Life and Death.

But it was Battersea Arts Centre that, in 2001, gave the company its big break in London, with a three-week airing of the award-winning Red Shoes - another adaptation of a Powell and Pressburger venture. So it's fitting that, as the venue moves into its 25th year, Kneehigh is back at this venue and providing the Christmas show.

Technically, Rapunzel represents a departure for the company in two respects. It is the first time that Emma Rice has directed a pre-existing script - the wonderfully involving, witty and emotionally potent version here is by Annie Siddons who has been inspired, in turn, by Italo Calvino's variants on the narrative. And it is the first time that she has directed a show aimed at children.

In practice, though, these new considerations don't make much difference. Like those names embedded in seaside rock, the Kneehigh signature runs indelibly through this exhilarating piece. A childlike enthusiasm for story-telling combined with a inspired knack of finding a fresh angle on mythic profundities is the hallmark of a company that has often developed material derived from folk tale.

Those working principles are now is extended to embrace very young children as well as regular, clued-up, theatregoers. I sat near a large group of six-year-olds - they were a very winning bunch and the performers played up to them with a lovely, impish inclusiveness, holding their attention throughout.

"Ooh, it smells like Christmas in here," remarked the woman behind me, as we trooped into BAC main auditorium. A seasonal spicy aroma hits the nostrils because of the bunches of dried herbs that dangle over two circular wooden-planked tables that form the raised acting area. The audience sits on three sides of the playing space; the fourth side is where the actors double as instrumentalists and singers, plucking an array of mandolins, banjos, and electric guitars. These human performers are supplemented by beguiling puppets, including a wild boar who, to the delight not just of the children, excretes a hefty turd containing three magic golden acorns.

Siddons's version remains strongly faithful to the central notion of a young girl who, once she hits puberty, is trapped in a tower by the jealous, stiflingly protective love of a bad-mother-figure. Here, the turreted imprisonment of Rapunzel (the enchantingly mettlesome Edith Tankus) is represented by having her balanced on a high swing and, by a neat piece of visual paradox involving a system of pulleys, when visitors climb up her rope of hair, this is betokened by the descent of the swing to their level.

The heir to a dukedom (Pieter Lawman) who falls in love and tries to rescue her is true to the original, blinded for his pains. But in Siddons's account, Rapunzel is no longer an essentially passive sufferer. She embarks on a dangerous mission to find her lover and ends up disguised as a man.

The situation is complicated by the fact that the ducal heir has a flouncing, jealous, brother (a hilarious performance by Mike Shepherd, who doubles as the baleful villainess) who is so determined to prove that his sibling is dead that he's prepared to hack off his own finger to use as "evidence".

Paul Hunter is very funny as the little man, Pierluigi Ambrosi, a gabby nonentity who gets embroiled, for money, in the machinations and keeps announcing to the audience that he is, officially, leaving the story.

He never manages to do so, of course, and his predicament and dottily hapless perspective only add to the richness of this marvellously multi-layered seasonal show.

To 14 January (020-7223 2223; www.bac.org.uk)