THE MEXICAN Cultural Institute is under siege by ghoulies and ghosties and long-leggety beasties and things that go bump in the soul. The creatures flap, slither and crawl through an exhibition of "Fantastic Zoology" by Mexican renaissance man Francisco Toledo.

The series of watercolors and ink drawings was inspired by the intellectual bestiary created by the great Argentine writer Jorge Luis Borges (1899-1986). It embraces beasts suggested by legends of many lands, by other writers such as Franz Kafka and especially by Toledo's own fertile, feverish imagination.

It's a wonderful feat of sustained whimsy, with imagery that's ever-fresh and endlessly mind-warping. Some of the creatures, such as a pushmi-pullyu snake/pigfish, transmute themselves before your very eyes, so that it's not possible to say whence it cometh nor whither it is tending.

Here are Kafka's lambcat, which cannot bring itself to kill; the amphibious ichthyocentaur; and Bahamut, the fish upon which rests all those things upon which the world rests. Toledo, 50, is as antic and inventive as Picasso, and just as sex-centered, so we are titillated by a superpriapic seahorse that surfs himself shoreward to service beachbound mares, an ambidextrous unicorn and, er, a male sow.

From the United States, Toledo presents the backward-flying goofus bird and the horrible hidebehind, which is always at your back when you go through the woods, no matter how quickly you turn to try to surprise it. It eats loggers.

But the most fantastic creature presented is the elephant. A plain old elephant, just standing there, reminding us, as Borges says, that "the zoology of dreams is far poorer than the zoology of the Maker."

Beyond Toledo's incredible inventiveness, what sustains the show is the uniformly high level of his art. His drawing is spare and incisive; with a few seemingly casual lines Toledo summons up visions that send the brain into overload. His watercolors are muted and suggestive; they irresistibly seduce the eye into exploring images from which the mind is trying to recoil. Each is accompanied by superb translations from the Spanish by Norman Thomas di Giovanni.

Created in 1983 to illustrate a book published in homage to Borges, the 43 works were consigned to Mexico City's Galeria Arvil for sale, but director Armando Colina could not bear to break up the collection and so bought it. Since then it has been on a world tour, of which Washington is the 16th stop.

"This may go on forever" says Colina, shrugging and smiling.

FANTASTIC ZOOLOGY by Francisco Toledo -- Through April 21 at the Mexican Cultural Institute, 2829 16th St. NW. 202/728-1628. Open 11 to 6 Tuesday through Sunday. There is no wheelchair access to the institute, which occupies the historic McVeagh Mansion.