The Celtic mythology of the classic fantasy movie Highlander meets the sort of unglamorous, everyday realism of a Ken Loach drama in a new supernatural thriller set mainly on an Edinburgh housing scheme.

Outcast begins shooting early next month and stars James Nesbitt, famous for his roles in TV dramas Cold Feet and Murphy's Law, and as the hapless hero in a series of adverts for Yellow Pages.

The 44-year-old Irish actor plays against type in Outcast as Cathal, a killer in pursuit of his former lover Mary, a mysterious woman who comes from an ancient and magical Celtic race. Mary hides out in one of the Scottish capital's more anonymous, outlying districts, along with the teenage son they produced together.

Outcast producer Eddie Dick promises it will reinvent the horror genre, which in Britain is still heavily dependent on the past glories of Christopher Lee, Peter Cushing and the Hammer films of the 1950s, 1960s and 1970s.

"It's a Celtic horror film," said Dick, who is based in Edinburgh and is in charge of the Scottish end of production. The film is an Irish-Scottish co-production and already has a UK distributor in place, with the likelihood of a British cinema release later this year or in 2010.

"It is unlike horror in remote castles and ancient past and so on," said Dick. "It will have a realistic, urban feel about it, which does divide it off from the artificiality of Hammer and Universal (which was famous for its horror films in the early 1930s, including Frankenstein and Dracula).

"These were fine films in their way, but this is questioning the edge of the genre The story in a sense has a kind of social realist base, but it begins to develop and twist out of that quite quickly, and that's linked in with an exploration of Celtic mythology."

Outcast draws on ancient Scottish and Irish myths of the Sídhe or Síth, an ancient race with magical powers, which traditionally can include invisibility and the ability to see into the future.

The term is pronounced "shee" and variations include "banshee", which literally means woman of the Sídhe, though the tradition is often linked to prophecy of death.

George Lucas also used the term Sith in his later Star Wars movies for the villains on the dark side, enemies of the Jedi. The last instalment was called Revenge of the Sith.

Dick said that, in the film, the last survivors of the Sídhe live largely unnoticed among the human population - just like the immortals in Highlander. The original 1986 Highlander film was set mainly in the Highlands in the 16th century and New York in the 20th, while Scottish housing estates have usually been the preserve of realist Ken Loach films such as My Name is Joe and Sweet Sixteen.

Nesbitt's character, Cathal, has a relationship with one of the Sídhe, Mary, played by Kate Dickie, star of the award-winning Scottish film Red Road.

The film begins in Ireland, but Mary and her teenage son, Fergal, go on the run and head for Edinburgh. They hope to find anonymity and security of having other Sídhe nearby. Mary wants them to keep their distance from humans, but Fergal finds himself drawn to an attractive teenage neighbour.

The film-makers will be shooting in such unglamorous locations as Niddrie, Muirhouse and Sighthill, as well as more familiar city centre locations.

Dick does not want to give too much of the plot away, but although Cathal is human he has acquired some of the Sídhe powers, which he uses to try to track Mary and Fergal down.

Dick said: "She's on the run and she eventually gets to a point where she has to make a stand, and it so happens that it's here Edinburgh.

"It would spoil the story to elaborate on it much, because on the surface it looks like Cathal is just an out-and-out villain. But in fact, he has complex reasons for doing what it is that he wants to do."

The film-makers are in the process of finalising other roles, which will provide several Scottish teenagers with a chance of stardom.

Outcast marks the feature film debut of Colm McCarthy, an Edinburgh-born writer and director who has directed episodes of such TV hits as Footballers' Wives, Hustle, The Tudors and Spooks. He previously worked with Nesbitt on the popular crime series Murphy's Law.

They will be shooting for three weeks in the Edinburgh area and two weeks in Galway.