"Kwaidan: Three Japanese Ghost Stories," which plays through Sunday at the Kennedy Center, is a serene enchantment. Nipponophile Lafcadio Hearn's 1904 collection of Japanese supernatural lore is already the basis for a classic film. Now Asian American theater artist Ping Chong has adapted three of the tales for puppetry, and the result is startling, funny, eerily beautiful.

In the first story, a Buddhist monk watches over the bed of a recently deceased man and encounters a jikininki (flesh-eating ghoul). In the second, a blind magician is hired to perform for the dead. In the third, a young girl who dies before her marriage is reincarnated and rejoins her beloved. The stories are sketchy, like folk tales. The fascination is in the way Chong tells them.

Designer Mitsuru Ishii has built a stage on the Terrace Theater stage, painted to look like black lacquer and gilt, its frame the shape of a medieval Japanese gate. The blank back wall of this stage can shift to produce a line of three round portals, or three rectangular ones, or a combination: windows through which we watch the strange happenings.

Sometimes we are looking at a landscape like something from a Japanese screen, mountains against which the tiny puppet figure of the monk labors upward, a stream roaring in the background (the sound, by David Meschter, is extraordinary). Sometimes when two of the round windows open they are filled with horrible gigantic eyes that blink to reveal wrinkled lids. Occasionally a portal slides aside and we are looking down at a scene, as if through the lens of an overhead camera.

Shadow puppets may be cast on a screen over a portal, or a photograph of a mountain cottage may be projected onto one. The variety possible with these modest tools is part of the show's wonder. The set is a sort of narrator, an active participant in the storytelling. (Those who saw "Titanic" in New York will recognize the source of that show's astonishing staging.)

The puppetry was "coordinated" by Jon Ludwig, the artistic director of the Center for Puppetry Arts in Atlanta. He and his unseen puppeteers manipulate figures only about two feet tall as well as shadow silhouettes, giant puppets we see only from the shoulders up, and those awful eyes.

This sophisticated, otherworldly experience isn't really a children's show. Some of the details are cruel (the poor blind musician also ends up earless) and some of the design grisly (the jikininki has what looks like a raw, flayed head).

On the other hand, it isn't all uncanny and shivery: There's a satirical sequence set in a McDonald's. So the modern West barges into this delicate ancient Japanese art.

Kwaidan: Three Japanese Ghost Stories. Conceived, directed and adapted by Ping Chong from the book by Lafcadio Hearn. Projection design by Jan Hartley. With David Ige. Puppeteers: Pamella O'Connor, Lee Randall, Fred C. Riley III, Don Smith. Produced by Center for Puppetry Arts in association with Ping Chong & Company. Touring in conjunction with Henson International Festival of Puppet Theater. Call 202-467-4600.