Interactive theatre company Look Left Look Right have appropriated London's most Christmassy district, Covent Garden – with its thirty-foot tree and snowy displays in every window – for the setting of their Christmas show, written by Morgan Lloyd Malcolm and Katie Lyon. Once Upon a Christmas is a magical experience for grown-ups, more adventure than theatre, which leads participants into Pollock's Toy Museum, the cellar of Penhaligon's and the Hackett fitting room, introducing us to the people of Panto Land – on the loose and at large in the Piazza – along the way. We are on a mission to save Christmas and as we meet Snow White, Buttons and the Fairy Godmother, among others, we must piece together the pieces of the puzzle.

It all starts when you press the buzzer marked "Elfs Ltd" on a shiny black door down a side street just off the Piazza. My partner and I (the idea is that you travel as a pair) were led upstairs by an elf with a clipboard and waited quietly, in a shabby box room, to be summoned upstairs, from which we could hear yelling. We took a seat on tiny, green elf-sized chairs and helped ourselves to "elfa-seltzers", colourful fizzy drinks in test tubes. Signs around the room cautioned against repetitive strain injury in the workplace – "elf and safety" warnings of course, not that they pointed this out.

This is the elf head office and we were soon ushered upstairs to meet the head elf himself, seated at a cluttered desk surrounded by folders ("Christmas letters '12" etc) and stacks of presents. He slams the phone down as we enter and bellows orders at us, Malcolm Tucker-style. You see, things are tense here at Elf HQ: Cinderella and Prince Charming have gone AWOL, just before their big wedding, and all of Panto Land is in a panic. It's our job to find out where they have got to, and to make sure they are married by midnight. Without the wedding, Christmas will be cancelled.

What follows is an extraordinary evening of intimate, mainly one-on-one, conversations with the key figures of this fairy tale-turned-detective story. An intern elf ("just helping out over the festive period, but I'm really hoping for a permanent position here") shows us the extent of the scandal spreading across Panto Land, brandishing glossy magazines with salacious rumours splashed across the front pages and pictures of Cinders with the prince's best friend, Dandini.

This kind of detail is what makes the show so effective. Look Left Look Right have created a brightly-coloured fairytale world right in the heart of our own, and it's where these two worlds overlap that the spell is most potent. Interactions with the "normal" people around us only increases the drama of the piece. At one stage, my partner found himself on the roof on the market buildings, hurling abuse at passers-by, egged on by the wicked stepmother. My own first solo encounter (the intern elf pointed my partner in one direction and me in another) was with the gossipy, foppish Dandini ("You know why they call her Snow White? Massive coke head") as he tried on a Hackett jacket. Left to my own devices, I had to ask the woman behind the till, who was serving a customer, if she had seen him.

There is something hugely exciting about suddenly finding oneself alone in the middle of Covent Garden Piazza, with an appointment with one of the ugly sisters. The actors (all adept improvisers) guide participants just enough, but don't overdo it – and this is true not just of moving from place to place, but also of the conversation, which wasn't so much a case of chipping in when asked, but of steering it oneself. I had a deep and meaningful conversation with Buttons, who asked if I'd ever had my heart broken before producing a bottle of vodka and pouring us each a shot.

Other highlights (though there are too many to mention) included posing as a royal image stylist, chatting to a pumpkin-selling 13th-century monk and hitching a ride in a rickshaw pedalled by a mouse-cum-horse: "I'm transitioning" he said, another victim of one of the Fairy Godmother's spells. The performance ends with a stunning twist, which I won't give away, except to say that it is as inventive as the rest of the piece – another example of Look Left Look Right's high-spirited originality, and proof that when interactive, participatory, site-specific (all those too-readily bandied about words) theatre works, it can be extraordinary.

Once Upon a Christmas, at Covent Garden

This Christmas show for adults, by acclaimed theatre company Look Right Look Left, is about as Christmassy as it gets: a fairytale adventure set in the heart of Covent Garden, with elves, magic and a rickshaw ride in the Piazza.