The Masque Of The Red Death, Battersea Arts Centre, London

This evening was for me a bizarre progression from embarrassment to admonishment to astonishment and then to sky-high elation. It began as I toiled up Lavender Hill to the BAC. Rain was stinging my eyes and, thus blinded, I entered what I thought was an internet café and sat down at a computer terminal. I could sense a certain froideur building up around me, so I blinked my way back to 20/20 vision only to discover that I was at a staff desk in an estate agents' and that my new colleagues were not my biggest fans.

Consequently, I was already in quite a dislocated mood when I arrived at the BAC for The Masque of the Red Death, which proved to be one of the most mind-blowingly imaginative pieces I have ever seen. Inspired by the crazed Gothic stories of Edgar Allan Poe, it's the latest work from Punchdrunk, the outfit that won glowing reviews for their tenebrous site-specific Faust, a version that sent punters on criss-crossing journeys over five floors of an abandoned archive building in Wapping.

There are key similarities between the two pieces, such as the fact that the milling audience-members are once again made to wear masks and are thus rendered both more alien to and more intimate with one another.

The crucial difference, though, is that here, instead of using a "found" location, the inspired makers of the piece – a co-production with the BAC that's underwritten by the National Theatre – have transformed the old Battersea Town Hall into a spooky, inexhaustibly intricate warren of lamp-lit interiors and cabinets of curiosities.

Stretching from cellar to rafters and built around the central grand, marble staircase, it's a maze-like world of darkling forests, theatrical curtains and creepy corridors, where you might chance upon a kinky, full-scale Victorian music hall where you can have a drink with fellow-punters or suddenly find yourself grabbed by a cast member and dragged through a chimney piece into a wardrobe where a mad woman whispers runes of supposed comfort into your ear.

Immersive theatre is not a new thing, but Punchdrunk take it to a level of quite vertiginous virtuosity as various stories (most of them involving madness and sex) leak into one another in elaborate, beautifully furnished domestic rooms that reek of eros and insanity. A four-poster bed, the legs of which are tree trunks, becomes the site of a thrashing, all-angles ballet of mutual derangement and violation.

In the corner of another room, as much a fixture as a grandfather clock, a young frock-coated man is frozen in the action of trying to push his way out of the wall.

It's a show that sends its fingers rippling up the full keyboard of sexuality. From the disarmingly desirable man who measures you for your capes near the entrances and fixes you with a mesmeric, contemptuous stare that dares you to make a pass, through the gender-confusing music-hall acts, to the dinner party where you could literally cut the sex with a knife, this is a piece that would have brought out the bisexual in Maria Von Trapp.

Want to see it again? If I were as rich as Proust or Des Esseintes, I'd make a bid to buy the whole dreamscape and indeed I'd recommend it to anyone for private functions – though perhaps not for wedding receptions. Sometimes, it made me feel as though I was at one of Visconti's more than usually recherché thrashes; other times it made feel as if I was in L'Année Dernière à Marienbad as I retrod the path to a favourite fantasy.

Always, it made me think that the show brings to triumphant completion a certain type of site-specific theatre and starts a new experiment that leaves you trembling with anticipation. The performers hurl themselves into it with ferociously disciplined abandon. I shan't give away the utterly sublime ending.

One insane character shook me and asked if I could bring his nightmare to an end. As a critic, there's one way I could really help this guy. Instead, I'd like his ordeal and the piece that contains it to run forever.

To 12 January (020-7452 3000)