Loris Gréaud is one of the hottest stars of the international art scene. Two years ago he won the Prix Ricard SA, France’s equivalent of the Turner Prize, which gave him the chance to show Devil’s Tower Satellite at the Pompidou Centre. It’s a replica of the Devil’s Tower monolith in Wyoming, which features in Steven Spielberg’s Close Encounters of the Third Kind as a beacon for extraterrestrials.

Like all his work, Gréaud’s mountain is as much an idea as an object. This giant inflatable is rumoured to have mutated into a balloon that took off over Paris with several passengers in the basket. A photograph records lift-off but, since nobody saw it happen and Gréaud is not letting on, no one can be certain whether the event actually took place.

Now 29, Gréaud has become the youngest artist to be offered the whole of the Palais de Tokyo in Paris, a 40,000-sq-ft venue which he has filled with a series of installations. A sister show is due to open on Friday at the Institute of Contemporary Arts in London. “Fade out in Paris, fade in in London,” he says, because the two shows overlap only by a couple of days.

The filmic image is appropriate, since Gréaud is fascinated by the power of stories and the creation of myth. It’s an interest that the young Frenchman learnt from one of his heroes, Yves Klein, who sold empty spaces in Paris in exchange for pure gold, which he then threw into the river Seine. This, he claimed, enabled his buyers to experience the void. Klein’s own experience of the void came in 1960 when he performed his Leap Into the Void, a swallow-dive off a Paris rooftop recorded in a black-and-white photograph, which may or may not have been faked. No one knows, but it has secured Klein’s place in the history books.

What is important is not whether Klein’s leap took place or Gréaud’s balloon actually took off, since what is at stake is a leap of faith. In Gréaud’s case, the magic is obviously working, because two years ago he was invited to make some sculptures specially for the Frieze art fair in London.

Working with scientists at the National Centre for Scientific Research in Paris, he produced nanosculptures measuring one millionth of a metre. They are too small to be seen without a powerful microscope, so you have to take them on trust; this clearly appealed to people, though, because collectors snapped up these tiny treasures. Were they canny or were they duped? And does it matter?

Gréaud was born in Eaubonne, a middle-class town on the outskirts of Paris. He studied the flute at a music conservatory, but was expelled at 14 for forming a studio of “musical unlearning” after hearing the compositions of John Cage. He was a multimedia protégé, and by the time he went to art school had already studied graphic design and film, set up a studio for experimental film and become a record producer.

Now he frequently works with specialists from other areas: “Most important for me are the ideas. The medium I choose – whether it be fireworks, film or fibreglass – always follows the idea; but I take care that the idea doesn’t get distorted by its realisation.”

When Gréaud’s work arrives at the ICA, black champagne will be served – not in the bar, but in the gallery where it forms an integral part of the exhibition. Drink it at room temperature, he cautions, because otherwise it has the power to make things replicate.

Repetition and replication are two of the devices he uses to spook his audiences; if you venture from one room to the next, expect to be overcome by a disconcerting sense of déjà vu. There’ll be an uncanny likeness between the three spaces and, in each one, you’ll meet an invigilator who looks like a clone of the person that served you champagne. Don’t worry, you’re not drunk, just encountering triplets.

Needless to say, one of Gréaud’s favourite books is Alice in Wonderland, black champagne being his equivalent of Alice’s “drink me” potion. Like her adventures, what follows may only be a dream or an illusion but, nevertheless, it is an extremely pleasurable one.

“Believing is more important than seeing and it’s always more interesting,” Gréaud says. “I believe that the best exhibitions are the ones you’ve only heard about.”

Maybe I Iack imagination, but I don’t agree; and when he asks me how I found his show at the Palais de Tokyo, I say “frustrating”. This sparks a conversation about the relationship between frustration and desire. “I intend the work to produce desire rather than frustration, which is not productive,” he says.

“But what is really important for me is potential.” There’s a piece in Paris which is like a time bomb waiting to go off. A floor-to-ceiling wall piece, it consists of 140 fluorescent tubes filled with propane. It remains switched off because, if you plugged it in, the tubes would explode, taking the whole arts centre with them. Now that is my idea of potential!

The name of the whole project is Cellar Door, consisting of four parts. Besides the exhibitions in Paris and London, there’s a studio designed by Gréaud’s DGZ Research design team. An image of the building, which is planned to be constructed on the outskirts of Paris, will be projected on to the wall in the ICA.

The fourth element is a one-act opera composed by Thomas Roussel and based on a libretto by the Lithuanian curator Raimundas Malasauskas and the musician Aaron Schuste. A surreal journey through the space-time continuum, it is described by Gréaud as “a story of illusions and disillusionments.” The main character, a cellar door, is sung by the soprano Marie Devellereau, who shares the stage with an 85-piece orchestra.

The scale of Cellar Door may be hugely ambitious, yet Gréaud does not come across as a megalomaniac. Working like an architect or a film director, whose projects rely as much on others as themselves, requires a different kind of personality from solitary, studio-based work, and this thoughtful young man seems devoid of the enormous ego that drives so many artists. He is a dab hand at marketing, though.

As I write, I am sucking a “Celador” sweetie, which according to the advert offers one “the taste of illusion, or the illusion of taste” – another way of saying that it is completely tasteless. You’ll be able to buy them at the ICA, but you’ll have to be quick because they have proved incredibly popular. Gréaud hopes to see them on supermarket shelves soon. Suck one and prove what a sucker you are!

Cellar Door is currently showing at Palais de Toyko, Paris (until Apr 27, 2008), and opens at the ICA on Friday

Editor's choice

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