The cover is intriguing, so you pluck the magazine from the newspaper rack and begin flipping through the pages.

You are surprised that People magazine would be so bold as to produce a cover story on ''The 25 Most Irritating People of 1985.'' But the hour is late, you are standing alone in a drugstore, and the idea does not strike you as implausible. So you turn to the center spread, and you nod in agreement with the editors' selections: Madonna . . . Joan Rivers . . . Pete Rose . . . Sylvester Stallone . . . Mary Lou Retton . . . Ed Koch . . . Nancy Reagan . . .

Hold on, you thinkNancy Reagan? People magazine, pummeling the First Lady of Washington and Hollywood? You read the caption beside her picture.

''This year, our Nancy has been media-ubiquitious, consistently embarrassing, and strangely terrifying. Do you think her body is shrinking or is her head getting bigger?'' it says.

Now, finally, you realize you've been had. get it. Not to worry; it is easy to be fooled by Parody People, the "one-shot" lampoon magazine that appeared quietly on the stands this week to satirize Time Inc.'s peerless journal of celebrity sycophancy.

With its familiar People logo, its collage cover photo of the grinning rich and famous and its loud primary colors, Parody People manages to erase altogether the fuzzy line between humor and celebrity journalism.

Its typefaces and graphics duplicate precisely the splashy, open look of People, and the lampoon offers articles on Ed McMahon's School for Shills, new face lifts of 1985, and "Barbara Walters: The Self-Interview" -- a television preview "for those of us who feared it had to happen."

Parody People Executive Editor Gerald L. Taylor said yesterday that he chose to satirize People because the magazine "takes foolishness seriously . . . Anybody that institutionalizes foolishness and nonnews, that's a statement about our society. What we try to do is make it almost as funny as the real thing."

But Taylor and his partner, Edward M. Shain, also published Parody People in the hope that their New York-based company, TSM Publishing Inc., "will someday be as big as Time Inc." Previously, Taylor and Shain have produced parodies of Rolling Stone, Playboy, Penthouse and Cosmopolitan. While waiting for their satirical media empire to sprout, however, the pair also work as marketing consultants to a number of large corporations.

Taylor worked for a while at National Lampoon and at the Harvard Lampoon, where he helped to develop a parody of Newsweek. He is not fondly remembered at Harvard. "He's an advertising guy who used to work for us," a Lampoon spokeswoman said disgustedly. "He's just so rude, that's all -- just a typical successful businessman."

People magazine itself, however, has taken a more benign view of Taylor and his work. The magazine even bought a full-page ad in its satirical counterpart.

"I thought it was pretty funny," said People News Editor Hal Wingo. "The look of the magazine obviously reflects that they know our magazine well. Even that cover story was a wonderful play on our own thing, the 25 most intriguing people of the year. They were familiar enough with what People does so that they could twist it and make it absurd and funny."

It took Taylor's staff of 12 to 15 writers and artists about three months to produce Parody People. Their next target, Taylor said, will not be a magazine -- "we've run out of those, probably."

Instead, they will train their sights on television, where unwitting self-parody is nearly as common as original programming. What will Taylor choose from TV's smorgasbord of satirical targets? "MTV is our majo candidate right now," he said.