Simon Stephens has said Chekhov is his favourite writer. Following his glum version of The Cherry Orchard, he returns for a crack at The Seagull – and absolutely nails it. Stephens' text is both properly funny and properly gut-punching. The dialogue seems to slice through the air, and Chekhov's insights into the human condition land at almost every line.

It helps that the ensemble is top notch and, under Sean Holmes' direction, terribly lucid: he's pin-pointed each character, so we recognise them all, feeling their pain as well as laughing at their foibles.

Stephens' translation is briskly modern – bar a couple of jarring references to horses – and the cast are in modern dress: Konstantin skulking in a leather jacket, Nina in a silver lame swimsuit. Hyemi Shin's set opens gorgeously drenched in fairy lights, but after that involves grey exterior then interior walls – presumably suggesting how penned in they become, but not exactly enlivening the action. Still, the design efficiently charts a mood from optimistic, youthful spring to a dour, chilly winter.

And the fourth wall is down: Stephens allows asides and addresses to the audience, served with an off-hand lightness by Holmes. Adelayo Adedayo's gorgeous Nina – who arrives to a burst of Vivaldi's Spring, as if Konstantin's love is splurging out in music – is especially good at using these to show a young girl's head-turned confusion at the drama adults make for themselves (someone cast her as Viola, quick). By the end, she still doesn't understand it really, but that's no longer a source of bright comedy but of tragedy: she's left shattered, having been used by the louchely attractive novelist Boris.

Nicholas Gleaves's Boris persuasively shows the spinelessness of the talented and the lucky, able to take and discard what he wants, even if the scene where he's manipulated – er, literally – back into the palm of his lover Irina's hand is also a funny exposé of how men can be led by their penises. His speeches about the compulsion to write are tormented, but overlong; running at three hours, this Seagull could use its wings trimming occasionally.

The cast is uniformly good, but Paul Higgins stands out as the sarcastic but ultimately deeply sensible and humane doctor. Lesley Sharp makes for a gleefully ghastly Irina, the ageing, insecure actress who crushes her son Konstantin's artistic dreams. Her vanity is conveyed in every little hum and limb stretch, constantly surveying each scene for what attention she can wring out of it. This Irina lacks the glamorous allure the role is often gifted, and with spite levels towards Konstantin nastily high, she's hard to sympathise with – but an absolute treat to watch.

Brian Vernel's Konstantin will become a brooding creature, but early scenes show a young man who still has a sense of deadpan humour about his mother's failings – and who burns with artistic vigour. We don't roll our eyes; we want him to succeed, making the ending all the sadder. His final scene with Nina devastatingly captures what they have lost: the delicacy of youth, creative ambition, and first love.

One image really grabbed me: "we felt everything so deeply. And so delicately. Our feelings were like the petals from flowers", Nina says. Suddenly you remember at the start Konstantin ironically playing 'she loves me', tearing at a daisy and joking his mother doesn't; also the moment a jealous lover Pauline rips up a bouquet Nina has quite innocently given the doctor. Youth really is as brief as a bloom and love really is as delicate as a petal, and in this insightful Seagull, both are torn right apart.

The Seagull is at the Lyric Hammersmith until 4 November.