‘You’re like a vision from old fairytales,” sings the Prince to Rusalka, the doomed water-spirit heroine of Dvorák’s opera. Much in this new production by Ann Yee and Natalie Abrahami is a vision from an old opera house – in a good way. The old-fashioned feel starts with a beautifully realised aerial ballet of the Prince swimming into Rusalka’s arms and continues once the lights go up with Chloe Lamford’s sets, grand and opulent to match the richly textured orchestral playing that the conductor Semyon Bychkov is conjuring up in the pit.

So far, so old-school – yet some of the visual opulence is unashamed stage trickery. For Yee and Abrahami, Rusalka is about humanity versus nature, the despoiling of natural beauty by human carelessness. Their previous work together has been ecologically conscious, and that continues here: you can be impressed by the lushness of the hanging fronds around Rusalka’s lake without guessing that they are made from metres of the wardrobe department’s old offcuts.

Annemarie Woods’s costumes have a dressing-up-box feel, with wood spirits covered in mossy clumps and with Alexei Isaev’s Vodník entering like Lucius Malfoy dressed by Issey Miyake. Rusalka similarly wears a translucent cape, pleated from neck to toe. But as they move and the fabric catches the last-ray-before-sunset glow of Paule Constable’s lighting, we realise that they are not merely fairytale creatures emerging from the water: they are the water itself.

This fragile beauty can’t survive Rusalka’s move to the Prince’s palace, where she is buckled into a silver corset and everything else that’s natural is covered in gold paint or imitated in inflatable plastic. When we return to the lake in act three it’s not only Rusalka who has lost her innocence – the water is polluted, the wood spirits enraptured with the junk the Prince’s party guests have left behind.

Asmik Grigorian’s first Rusalka in the UK doesn’t disappoint: her polished-steel soprano glints and flashes. David Butt Philip is her outstanding match as the fickle Prince, his tenor soaring, and the rest of the cast is first-rate, from Emma Bell’s imperious yet flirty Duchess – almost the scrubbed-up twin of Sarah Connolly’s worldly-wise Ježibaba – to the comic pair of Ross Ramgobin and Hongni Wu as the forester and his nephew. All are supported at every turn by Bychkov’s wonderfully elastic and idiomatic-sounding orchestra. Yee and Abrahami may have transformed rags into riches on stage but it’s in the pit that the magic of this Rusalka really happens.

• Rusalka is at the Royal Opera House until 7 March