You're coasting on the back of successful one-man shows, you're erstwhile cinematographer to indie-whizz Jim Jarmusch, and director of the critical smash that gave one of Hollywood's new young studs his starting break. So there's no trouble financing a second feature, right? Not if your name's Tom DiCillo, apparently.

Despite the success of the eminently sassy and stylish Johnny Suede (1992), DiCillo's second feature started life as the half-hour short that now opens his second feature. In it, young film-maker Nick (Steve Buscemi) undergoes the trials and tribulations of getting that One Big Emotional Scene for his opus. People forget lines, cars blast past outside, lights explode, errant booms drop into frame.

Living in Oblivion (the title of Nick's movie) is a film about dream sequences - two literally, and one literal dream sequence. How do we know? Because it has a dwarf and smoke. Why do all dream sequences have to have a dwarf, rails the diminutive actor in the powder blue suit. He's a dwarf and even he doesn't dream of dwarves.

If the first dream is Nick's, the second belongs to leading lady Nicole (Catherine Keener), a covert passion for her director, and the rampant egotism of the outrageous TV soaper Chad (James LeGros). Chad is full of good ideas: he could lay on the bed; he could sport an eyepatch; he could barrel into the co-star he slept with the previous evening. All flouncing hair, desperate mugging and absurd, empty-headed Method, LeGros is spectacular. (In interview DiCillo draws a veil over the subject of Brad Pitt.)

The always reliable Buscemi is cornering the market in nascent film-makers, what with this and Alexandre Rockwell's splendid In The Soup (1993). Good practice, possibly, for his own directorial debut, the forthcoming Trees Lounge. Keener, DiCillo's muse, so good in Johnny Suede, is excellent, as is Dermot Mulroney's Wolf, Nick's narcissistic, leather-clad cinematographer with an eyepatch. The supporting cast are uniformly strong.

Aside from the odd establishing shot, the movie is restricted almost entirely to the one set. Fortunately, though, DiCillo neatly sidesteps theatricality with an imaginative use of monochrome and colour film stocks, cutting effortlessly as his film makes the leap between fantasy and reality. It's stylish without being self-conscious or, God forbid, pretentious.

And Living in Oblivion is funny. Which is no mean feat in an age where big and dumb (the bigger, the dumber the better) have become the watchwords of screen comedy. This is smart-funny, out of left-field, no punchline funny, enough to all but hide DiCillo's evanescent plot.

The Sundance Festival described it as "two explosions, two nervous breakdowns, one upset stomach, two seductions, eight dreams, one broken heart, one fistfight and four goatees". Components of a film out first and foremost to make people laugh and not necessarily to make a low budget movie about making low budget movies. In the event, DiCillo does both with no small measure of success.