According to the Oxford English Dictionary, the term ‘mashup' is first found in Dion Boucicault's hit 1859 melodrama, An Octoroon – or so Wikipedia tells me. One character, a native American, speaks a "mashup" of different languages: French, Indian and Mexican. More than 150 years later, black American playwright Branden Jacobs-Jenkins hasn't just revived or revised Boucicault's play under a subtly different, newly indefinite title. He's remixed it to make something altogether new – a dazzling deconstruction of racial representation.

In its day, Boucicault's original, a runaway smash that ran seven years on Broadway, was both radical and retrograde. Set on a floundering Louisiana plantation that's been put up for sale, its slaves set for auction, An Octoroon treats the subject of slavery with a degree of sensitivity and a dollop of sentimentality. A great big crowd-pleasing melodrama, complete with dastardly villains and an explosive climax, its progressive politics are all but cancelled out by its old-fashioned form. Seen by contemporary standards, it's thoroughly problematic.

Its hero, George Peyton, is a white slave owner who sticks up for his slaves…but still owns slaves. Its black characters, sympathetic for their time, now look offensively simplistic, and its romantic lead, Zoe, is an octoroon, one-eighth black, and so banned from marrying a white man. Boucicault's play cocks a snook at such laws, yet the playwright himself would don red face each night to play a tomahawk-wielding native American, Wahnotee. This was, don't forget, ahead of its time. It's a long way behind ours. With real virtuosity, Jacobs-Jenkins both honours and disobeys.

As in his first play Neighbors, seen at HighTide in 2013, Jacobs-Jenkins deploys minstrelsy to expose and exaggerate the racism in such representation. Ken Nwosu plays the playwright himself, BJJ, who "can't even wipe my ass" without someone reading a racial critique. He applies white face to play Boucicault's hero George and his villain M'Closky. Kevin Trainor, meanwhile, plays Boucicault himself, redding up as the near-dumb Wahnotee, while a third actor, Alistair Toovey, plays two slaves in thick black face, looking to god like he's just hopped off a jar of Robinson's marmalade. It's all deeply shocking, but darkly hilarious; satire at its most scornful.

With a savage and sophisticated sense of irony, Jacobs-Jenkins sinks his teeth into the relationship between representations and reality. His hero's blonde and blue-eyed; his villain, moustachioed with a mwah-hah-hah laugh. Iola Evans' sweet-faced Zoe gets a bow and a blue-dress, the picture of pretty innocence, while two house salves, Minnie and Dido (Vivian Oparah and Emmanuella Cole) spout sass like home-girls, undercutting our stock sense of both slaves and contemporary black women at the same time.

The original play sometimes disappears beneath all this, with the basic plot over-burdened by everything loaded on top, but Jacobs-Jenkins leaves no escape from the connotations that attach themselves to colour, traits and physicality. They become infused and entangled with feelings, and both Elliot Griggs' lighting and George Dennis' sound, channel-hopping between hip hop and Theo Vidgens' smooth cello score, makes clear the manipulation at play. That, Jacobs-Jenkins suggests, was Boucicault's crime. He twisted the truth for the sake of drama.

This is such fine-tuned theatrical thinking – from ideas of inheritance and dilution in the nature of an octoroon itself, to the focus on Boucicault's camera plot-device that sharpens the question of how we see past and present. When blousey Dora (a riotous Celeste Dodwell) poses for a portrait, she tries out postures of stock femininity, slut drops and saloon dolls, before opting for a bizarre balancing act.

Ned Bennett's production dives right in to the dark, testing humour, and draws committed and brave performances from a game cast. His DIY staging both dissects theatre and revels in it, and Georgia Lowe's design is deceptively simple, with freshly peeled paint a neat mark of the play's contrived authenticity. Everything tunes you into the way you watch the play and so changes the way you see the world. That's the mark of a good show: An Octoroon is as good as an eye transplant.

An Octoroon runs at the Orange Tree Theatre until 24 June.