BOOK REVIEW : New Master Storyteller Commences Her Reign : THE STORIES OF EVA LUNA <i> by Isabel Allende translated from Spanish by Margaret Sayers Peden</i> . Atheneum, $18.95, 288 pages

Never mind the Grand Vizier, the heartless king and all the unfortunate virgins who preceded Scheherazade. In all essential respects, the narrator of Isabel Allende’s “The Stories of Eva Luna� is the reincarnation of that marvelous storyteller, as the epigraph from “A Thousand and One Nights� suggests.

Readers of Isabel Allende’s memorable earlier novel, “Eva Luna,� will recognize her at once: the peasant girl from the hinterlands of a generic South American country who becomes a self-taught “seller of words.� By the end of that novel, Eva Luna had achieved fame, joy and an adoring, if temperamental, lover in Rolf Carle.

In the brief prologue to the new “Stories,� Carle asks Eva for a story, and she obliges with 23 enthralling tales in which folkloric themes are enhanced by a cosmopolitan, contemporary sensibility.

The result is arresting and altogether distinctive, powerful and haunting; a collection of stories to be read aloud, memorized and repeated for generations. In common with other writers from countries colonized by Europeans, Allende’s language recalls the rhythm of earlier centuries without being in the least archaic.

As in traditional legend, the characters are larger than life--embodiments of passion, cruelty and virtue. Look elsewhere for failing relationships, uncommitted lovers, jaded sophisticates and adolescents in search of themselves. Allende’s people know exactly who they are and what they must do to survive.

The first story, “Two Words,� sets the mood. Belisa Crepusculario has christened herself for “beauty� and “twilight,� having come from a family “so poor they did not even have names to give their children.�

Stronger and more resourceful than her doomed brothers and sisters, Belisa sets out across her country’s arid plains toward the sea. Along the way, she learns to read and write, earning a pittance as a storyteller, letter-writer and itinerant chronicler of village events.

Her reputation eventually reaches the ruling tyrant, who wants to become the legally elected president. He orders his brigands to kidnap Belisa and bring her to the camp to create his campaign speeches . . . and the rest of that story should only be told by firelight, to a rapt audience.

“Wicked Girl� is a tale of unrequited love in which an awkward 11-year-old girl becomes obsessed with the wandering minstrel who rents a room in her mother’s boarding house.

For several weeks, Elena was “repelled by the brilliantine-slick hair, the polished nails, the excessive zeal with a toothpick, the pedantry, the brazen assumption they all would serve him.�

Repulsion turns to adoration, however, and the child lies down beside the man while he’s napping, only to be thrown to the floor when he awakens and realizes he’s mistaken her for her mother. Seven years in a convent erase Elena’s memory of the incident but only intensify the man’s.

He has married the mother but lives in the grip of desire for the girl, who now stares at him speechlessly, unable to “remember any particular Thursday in her past.�

Several of the stories take place in the fictional town of Agua Santa, an impoverished, isolated settlement that forms the perfect milieu for these modern legends: large enough to contain a full complement of human eccentricity; small enough so that every event is visible to the entire population.

The unofficial mayor is Riad Halabi, a Middle Eastern peddler who settled there, prospered, and has been showing his gratitude ever since. Halabi reappears from time to time, functioning as catalyst, philanthropist and conscience.

Socially and economically, the town is typical of many benighted places in this country of extremes, but what other village has both a secular saint and a myth-maker?

There is violence in these stories--revenge, madness, death, lust and greed--but also compassion, vitality, humor, tenderness and generosity, and all in exquisite balance and proportion.

Superbly translated from the Spanish, the language creates an aura of mystery and wonder even in the tales clearly based on actual events and firmly rooted in the present.

If Allende’s life, like Scheherazade’s, actually depended on her narrative gifts, she’d not only survive, but reign.

Next: Carolyn See reviews “Vital Signs� by Robin Cook (Putnam).