When Oban-born fiddler Aidan O'Rourke arrived in Edinburgh in 1998 as a 22-year-old, he was immediately struck by the genre-hopping instincts of the city's music-makers.

"The first thing I noticed was the jazzers hanging out with the folkies, and the classical musicians playing Frank Zappa at the Bongo Club at three in the morning," says O'Rourke. "There has always been lots of great ideas shared in Edinburgh."

It was this spirit of cross-pollination that led, in 2005, to the formation of Lau, the acclaimed contemporary folk trio comprising O'Rourke, Orcadian singer and guitarist Kris Drever and English accordionist and keyboard player Martin Green.

Lau's vaulting explorations of contemporary folk music have since filled three albums, two EPs and won them Best Group at the BBC Folk Awards four times. Their adventurousness is also the guiding principle of Lau-Land, a three-day festival that places the emphasis on collaboration and interaction. Launched in London two years ago, in 2013 Lau-Land travelled to Gateshead and this year settles in the group's home base of Edinburgh, with a series of concerts and events at Summerhall and their "spiritual home", the Queen's Hall.

Curated by the band, who will open proceedings on the Thursday night, Lau-Land is a rich blend. There are performances from folk lodestars Capercaillie and Dick Gaughan, an intimate solo show from New York's Joan as Police Woman, and showcases for young talent, from Scotland's Ella The Bird and Adam Holmes to Vermont's Anais Mitchell. The band simply regard the festival as a natural extension of their own eclectic tastes.

"When we get in the van at the beginning of a tour we have always brought loads of new music to share with each other, and it is a broad range," says Green. "The focus of Lau-Land is to get some kind of melting pot going on, with lots of different kind of music. When we did the first one in London, we really enjoyed bringing together musicians we liked and the unexpected interactions between them."

Of this year's line-up, Gaughan is a "total influence", Capercaillie are both "legends" and "pals", while Joan as Police Woman, aka Joan Wasser, is a label-mate who is producing the next Lau album. It is a line-up, says Drever, "that reflects in some way on what we do and who we are." The activities away from the main stage are equally revealing about their priorities. Throughout the weekend there will be workshops for fiddle, guitar and lyric writing, an emerging music platform for new artists, the experimental Lau-Lab, and a club night on Saturday at Summerhall, hosted by the band and featuring numerous musical treats. "Only a fiver!" yells Green. "A complete bargain."

In the midst of it all, the trio will attempt to be everywhere, all at once. "We introduce everything, float around and pop up as guests," says O'Rourke. "It is good for us as a band, it keeps us learning. In a way, Lau-Land is as much for us as for the audience. There is a strong emphasis on collaboration across genres and that is really exciting to us, more than just folkies working with folkies."

Green concurs. "The boundary between folk and singer-songwriter is more blurred than it has ever been, especially in Scotland, where people like Adam Holmes are singing newly written songs with an understanding of traditional music," he says. "That was not true when I was growing up. There were people who wanted to be Paul Simon and people who wanted to be De Dannan, but they were not mingling with each other. In Scotland, people feel the folk tradition belongs to them and is there to be delved into."

Lau is "an open marriage," says Green. All three band members have vibrant solo careers and are involved in other projects, but they agree the band is the priority. "It's the mother ship," says Drever. "We go away and absorb a lot, and it all comes back to Lau. It is a very good outlet, a repository for all sorts of unusual bits of music. We have worked together enough now that we can throw pretty much anything at the canvas and it ends up sounding like Lau rather than a dog's dinner."

They are certainly becoming more ambitious. As part of the Glasgow 2014 cultural programme, Lau wrote an 18-minute piece in collaboration with the English contemporary classical group Elysian Quartet. "We saw parallels between our respective approaches to classical and folk music," says O'Rourke. Premiered at this year's Celtic Connections, The Bell That Never Rung will form the centrepiece of their new album, which the band will spend two weeks recording in Edinburgh next month. Joan Wasser will stay on after Lau-Land to produce.

"We discussed the two things with Joan simultaneously - doing the gig and then producing the new album straight afterwards," says Green. "She is classically trained but comes from the art-rock world, and she has an amazing understanding of a lot of different types of music. It will be exciting to see where that leads us."

The new album is due next spring, but right now they are focused on Lau-Land, and the culmination of several month's hard work. "Just thinking about it is making my head spin a bit," says Green. "Logistically, it is harder than we realised, but as a vehicle it is great. Even if we have a mild breakdown doing it, I don't think it will ever stop us doing it again."

Lau-Land, tomorrow to Saturday, Queen's Hall and Summerhall, Edinburgh. www.lau-music.co.uk/lau-land-home