WANTED: edgy Edinburgh comedians who don’t waste their hour reminding you how bloody edgy they are. After all, as various comics suggested in a feature in this paper at the start of the festival, the key to saying the unsayable is to set up a collusive atmosphere with your audience. An atmosphere where an anything-goes sense of play is a physical reality rather than a paltry proposition.

Not easy. The sketch trio We Are Klang manage it in their rambunctious gang show Klangbang. But of all the dozens of stand-ups I’ve seen at the festival this year Phil Nichol is the only one who creates an atmosphere of controlled hysteria, then rides that wave to do whatever he damn pleases. The effect is simply glorious.

The Naked Racist is an hour-long anecdote about a debauched weekend in Amsterdam. But along the way the Canadian comic crams in everything from naked Russian dissidents to a trip to a fetish club in Brixton; from alienating his girlfriend with a one-liner during foreplay to meeting an American mercenary taking time off from killing Iraqis.

Oh, and drugs. Plenty of drugs.

On paper, that’s not so far from the standard-issue revelations of a hard-living travelling comic. But this wonderfully sustained show is performed with a fiery fluency that trounces the written word. Nichol strums his guitar as the audience enter this tiny room, acknowledging one and all. He weaves the crowd into his sweaty storytelling without once taking his foot off the gas.

In the past his DayGlo diatribes were sometimes wearing. Here he offsets his outpourings with political and emotional context. He makes us comfortable with his excessiveness. But that’s a means not an end: “I’m a dangerous comic!” he roars self-mockingly. “Sometimes I chuck peanuts into the audience to see if there are any fatal nut allergies out there.”

Would this work as well in a less confined space? Probably not. Does he make the case for his softer-spoken conclusions about the pitfalls of aggression? Just about. Do you see more of Nichol’s dripping body than you want to? Oh yes. But it wasn’t just exhibitionism that made one punter fling her bra on to the stage in the finale. His transgressions are a liberation.

This is the third show in Nichol’s Edinburgh day — he’s also starring in the plays True West and Talk Radio — but you could still power a small market town from this performance. Add that to storytelling nous, stagecraft surprises and a brazen disregard for personal dignity and you’ve got a shameless shaggy dog story to warm the cockles of the heart.

Box office: 0131-558 7272

Editor's choice

• The 100 Best Films of the Decade
• 70 facts you didn't know about Marvel
• The 50 Biggest Movies Of 2010