Fantasy fashion fit for a princess

Imagine creeping up the back stairs of a royal palace, guided by whispering voices, to the sumptuous bedchamber of Queen Mary II. Or listening to a nursemaid reading the young Princess Victoria a bedtime story. Meanwhile, in Her Majesty's Closet, Queen Anne is having an argument with the Duchess of Marlborough.

In straitened times, fashion doesn't get much opportunity to be fantastical. But a new exhibition at Kensington Palace gives some of British fashion's most playful and innovative designers the chance to really use their imaginations.

'Enchanted Palace' is a series of interactive installations within the historical royal residence's state apartments, telling the story of the seven princesses who have lived there, through pieces designed by the likes of Dame Vivienne Westwood and acclaimed milliner Stephen Jones.

"I first came years and years ago when the Princess of Wales was living here, because I used to make hats for her," says Jones. "We used to do fittings here, so it's nice to see it all different and dressed up." The exhibition is part of an ongoing project to relaunch the Palace, which will be finished in 2012.

British couturiers Boudicca have also created pieces for the exhibition; mannequins adorned with sweeping brass curvatures dangle from the grand ceiling of the Cupola Room, alongside a crystal chandelier and above, as the centrepiece, a stunning baroque clock resting on a dais. "We looked at the idea of taking the internals of clocks and the internals of corsetry and fusing them together in flux, a mechanical sketch," says one half of the team, Brian Kirkby.

"You really feel the presence of history," adds his partner Zowie Broach. "People can be quite flippant about theme parks and so on, whereas you really need to understand how old all this is, how much history it is imbued with, and the elegance of it all."

And alongside the magical, there is a strong element of charmingly human historical detail. Young design duo Aminaka Wilmont, winners of the Fashion Fringe award in 2007, were inspired by the story of the childless Mary II. In her former bedchamber, the lights are dimmed and every available surface is covered in twinkling glass bottles and stoppers. The 'dress of tears' they designed, in blue silk embellished with hundreds of crystal droplets, hangs suspended over the four-poster canopy bed, as testament to the unhappy queen.

Along the hall, one of Vivienne Westwood's signature crinoline gowns stands on a sweeping marble staircase, in memory of the rebellious Princess Charlotte, daughter of George IV, who was loved by the public for being outspoken and fun-loving. All around, there are creeping ivy vines, artefacts from the royal dress collection and fogged mirrors, providing a perfect and mysterious stage for each of these ingenious creations.

Actors from the theatre company Wildworks rush from room to room, some singing and playing instruments, some disciplining invisible royal wards. One looks under the bed for the wayward young Victoria, in whose bedroom up-and-coming designer William Tempest has installed a period dress created from origami birds. Set designer Echo Morgan has made an 18th-century pannier dress from papier-mâché and willow, painted with antique maps to represent the journey made to Britain in 1705 by Princess Caroline of Ansbach, the wife of George II.

"Everybody else has done things about princesses," says Stephen Jones, standing in the wood-panelled Privy Chamber, surrounded by hats of his own creation. "Just to be contrary, because I'm a milliner, I haven't." There is bust of Isaac Newton in the centre of the room, with a sequinned apple headband hovering above his marbled curls. "I made this hat for Marc Jacobs, but it's a natural progression from that to Newton."

"Dressmaking is all about gravity, things falling onto your body. But for millinery, it's about defying gravity because we're building things to stand up. Every milliner has to be a physicist too."

And every princess needs to be a personality. Two of the palace's most famous inhabitants are recreated in a dancing tableau among a forest of birch trees: a white, sequinned Bruce Oldfield gown of Princess Diana's stands opposite a full-skirted Norman Hartnell prom-dress which belonged to Princess Margaret, bringing us more up-to-date.

The palace is the perfect backdrop for an elegant wonderland; even the most grown-up fashion follower may find themselves pretending to be a princess again.

Enchanted Palace runs until June 2012, Hrp.org.uk/kensingtonpalace