John Clare and Alfred Tennyson occupied radically different worlds. Clare was the Northamptonshire “peasant poet” whose nature verse kindled a flicker of fame before he sank into madness; Tennyson was the Cambridgeeducated son of a rector whose stately poems would later win him the post of Poet Laureate. But in the late 1830s they shared a home, pacing the same paths and breathing the same air, at High Beach Asylum, in Epping Forest. Adam Foulds has chanced upon this knot in history and unravelled it into a remarkable novel - an intensely felt, sharply focused, beautifully strange account of seven seasons in and around the asylum.

Foulds - who won the Sunday Times Young Writer of the Year for his first novel, and the Costa Poetry Award for last year's narrative poem, The Broken Word - takes liberties with the facts but resists the urge to bend them into a neat arc: in his version, Clare and Tennyson never meet. Instead the narrative pans around the forest, settling for a moment on a scene, catching a spill of interior monologue, before the picture dissolves and reforms elsewhere.

Tennyson is to be found skating on a frozen pond or smoking thickly in his room. A resident rather than an inmate - his brother Septimus is being treated for melancholy - Tennyson is nevertheless deep in a gloom: still mourning his friend Arthur Hallam, wounded by bad reviews, stuck in a poetic rut, he reads over lines from the as-yet unpublished In Memoriam. The young poet is occasionally roused by Hannah Allen - pale and sentimental, futilely seeking a husband in the shadow of her beautiful best friend, Annabella - or by her father, Dr Matthew Allen, the asylum's owner.

Allen is a restless intellectual polymath in his study and a compassionate padre in the asylum, but his outward cheer hides inner demons. As delusions of grandeur and hunger for a piece of the industrial revolution lead him astray, the care of his patients falls to his assistant, Stockdale - a violent brute whom Allen has seriously misjudged. Stockdale terrorises the inmates who wander the enclosed grounds, doubly confined by the prisons of their peculiar inner realities: one is solely responsible for the National Debt, another is visited by dancing angels and aches with Christ's wounds.

It is John Clare, though, who feels his imprisonment most keenly, and it is through his beleaguered consciousness that the outside world of the novel takes shape. Shunned by his rural friends, out of favour with the “flash company” of literary London, many miles from his beloved village of Helpston, Clare's identity fractures - but he continues to be energised by the forest “revealing itself” around him.

Clare's poetry has its own exact and sensitive vocabulary - a way of looking at Nature not in broad romantic gestures but in miniature observations. Foulds's poem The Broken Word, about the Mau Mau uprising, is a million miles from Clare's world in place and theme, but like Clare's verse it is fine-tuned to the environment, recording the movement of a black fly or the emergence of the stars with startling clarity. For The Quickening Maze, Foulds has absorbed Clare's distinctive word-shapes and made them anew. The forest bristles and bustles: Clare sees the “glaring, hooked darkness of holly bushes” and the “smithereens of spiral shell” on a thrush's anvil; he watches a robin “needle the earth... poised on its little thready legs” and a gypsy's terrier, “leaning towards him, as if in italics, to bark”.

Unlike Tennyson, who tastes, rejects, selects each word - “Waves. Rocks. Lashed. Or felt” - Clare produces poems as quickly as thoughts. When he is not walking the forest and naming the living things around him, he wrestles with his inner selves: though he is married to Patty, and father of her children, he is haunted by visions of his childhood sweetheart Mary, believing her to be his wife too. Different impulses overtake him. A bellicose, anti-authoritarian streak turns him into Jack Randall, prize- fighter. Sexually frustrated and held in the dirt and darkness of a solitary cell, he becomes Lord Byron, and sets about rewriting Don Juan as a highly sexed satire.

The “quickening maze” is both the confused paths of Clare's life and the twisting pattern of the forest. Lost in the former he is terrified, but lost in the latter he is willing to submit. Feeling Nature's porousness, Clare dissolves into it: “He loved lying in its lap, the continuing forest, the way the roots ate the rot of leaves, and it circled on. To please himself, to decorate his path into sleep, he passed through his mind an inventory of its creatures... And just before he fell asleep, he saw himself, his head whole, his body stripped down to a damp skeleton, placed gently, curled around, in a hole in the earth.” It's a beautiful evocation of Clare's longing - as expressed in his poem I Am - to sleep “Untroubling, and untroubled where I lie/ The grass below - above the vaulted sky”.

Foulds's exceptional novel is like a lucid dream: earthy and true, but shifting, metamorphic - the word-perfect fruit of a poet's sharp eye and a novelist's limber reach.

The Quickening Maze by Adam Foulds
Jonathan Cape, £12.99; 259pp Buy the book

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