Lenny Sklarew is a likable young ne’er-do-well who lives in a deserted Memphis neighborhood nicknamed “the Pinch,” works in a failing used bookstore called the Book Asylum and deals drugs in a flourishing dive bar. The year is 1968, the sanitation workers are on strike and the city is awash with protesters, policemen, hippies, uncollected garbage and psychotropic drugs.

Lenny is living in interesting times, but the best parts of this indefatigably funny and imaginative novel by Steve Stern are set in an even more interesting time: the second decade of the 20th century, when Lenny’s empty neighborhood was a crowded Jewish ghetto steeped in Yiddish folklore, bewitched by demented Hasidim and magically isolated from the rest of the world.

Strange things can happen in a neighborhood like that when the local holy men persist in tampering with time and space. Children fishing in a flooded street reel in mermaids, ancient amphorae and electronic gadgets yet to be invented. A man takes his young daughter for a walk through seasons that change from block to block, bundling and unbundling her as they go. Birds ingest a toxic worm that causes them to die if they fly over their shadows.

These enchanted events and hundreds of others are recounted in a privately printed book written half a century earlier by Muni Pinsker and found by Lenny in the Book Asylum. Muni’s book (also called “The Pinch”) claims to be a history of the neighborhood, but a history that includes the future as well as the past. Toward the end, it even includes a feckless bookstore clerk named Lenny Sklarew. That clerk is understandably intrigued and sets out to read the whole of Muni’s book, “a bible-thick doorstop in a cheap cloth binding.” Less understandably, he reads it from cover to cover instead of finding the parts about himself and reading them first as anyone else would.

Lenny’s saint-like patience (or incuriosity) makes him seem a little unreal at first, in accordance with the law of fiction that ordains the implausible is harder to swallow than the impossible. I had much less trouble suspending disbelief at the Hasidim whose seminal emissions spawn aerial demons capable of lifting a hot-air balloon. That’s partly because Stern has not only created a world where such things happen routinely, but he has created a cast of characters who take such things for granted.

“The Pinch” by Steve Stern. (Courtesy of Graywolf)

Stern worked for years at a Memphis folklore center and directed an ethnic heritage project nicknamed “Lox and Grits.” The Pinch, his inspired and outrageous re-creation of a real Memphis neighborhood, came out of that experience and has served as the setting for much of Stern’s earlier fiction, including his first collection of stories, “Isaac and the Undertaker’s Daughter” (1983). It’s easy to see why he keeps returning to the neighborhood. He has created a Southern microcosm as narratively fertile as Yoknapatawpha County, although in some ways more reminiscent of Coconino County or Okefenokee Swamp or even that nameless desert where the Road Runner dodges falling anvils and lures the Coyote off cliffs: “A Hasid with his nose in a volume of Talmud . . . stepped off the curb and ambled several strides over the water before he realized where he was and promptly sank.”

Reviewers have also mentioned Macondo, and there are certainly events that wouldn’t be out of place in “One Hundred Years of Solitude,” but the net effect is not magic realism as we know it, because in Stern’s novel, the realism and the magic are in separate sections. “The Pinch” is really two different books: Lenny’s and Muni’s, interleaved and sharing a title. Lenny’s “Pinch” is a (relatively) realistic first-person narrative describing his obsessions with Muni’s book and a beautiful young folklorist. Muni’s “Pinch,” of which we see only excerpts or maybe paraphrases, describes his escape from Siberia and journey to Memphis, his relationship with a tightrope walker and the long bout of graphomania during which he ignores everything else to write the book Lenny will read decades later.

The heart of Stern’s novel is an eight-year period from 1913 to 1921 that passes as a single festive and phantasmagoric day for the charmed inhabitants of the Pinch. This part of the story has the highest concentration of magic and achieves a surreal intensity like nothing since Bruno Schulz. The rest of the book is almost as good.

Miller’s most recent book is “American Cornball.” For more book coverage, go to washingtonpost.com/books.