Diana Vreeland was a scarlet woman.

Her wide lips were slashed crimson, her cheekbones – so high they had altitude – were rouged terracotta, as were her ears. Her nails were vermilion talons. She wore her blue-black hair lacquered in the style of the sphinx. Her accessories were matching ivory cuffs, an ivory tusk on a gold chain and scarlet Roger Vivier snakeskin boots, the soles of which were polished daily. Pin-thin, she walked on the balls of her feet, yet with a curious camel's sway.

This was Vreeland, the legendary editor, aged 79, immaculate in black cashmere (Braemar). And you thought the devil wore Prada. Actually, Vreeland's unique style had been honed decades earlier – even her Manhattan apartment was decked out in red Chinoiserie "like a garden from hell".

Vreeland, who died in 1989 at the age of 86, was fashion editor at Harper's Bazaar for 26 years before becoming editor-in-chief of American Vogue; then, in her seventies, she was appointed consultant to the Costume Institute of New York's Metropolitan Museum of Art, where she styled their staid costume exhibitions into the blockbusters of today, filling the galleries with glamour, perfume and thousands of visitors – one of the great third acts in an American life.

She's the woman who created pizzazz – she coined the word – discovered Lauren Bacall, made blue jeans chic, invented the term Youthquake in the 1960s and declared pink "the navy-blue of India".

"I knew very little of this," admits Edinburgh-born-and-bred Amanda Mackenzie Stuart, a 58-year-old former screenwriter and film producer who has written a dazzling, meticulously researched, insightful biography, Diana Vreeland: Empress Of Fashion. "I was only vaguely aware of her. If I thought of her at all, it was as some achingly hip grandmother on the New York scene, who ran around with Andy Warhol and who would crop up in photographs with Mick Jagger."

But while she was researching her first book – the critically admired Consuelo And Alva Vanderbilt: The Story Of A Daughter And Mother In The Gilded Age (2005) – she discovered that, in 1964, Vreeland launched a new lifestyle feature in Vogue with a very good piece about Consuelo. "I then found that she had put Consuelo into her 1976 Metropolitan Museum exhibition, American Women Of Style," says Mackenzie Stuart, a York University history graduate, who has spent four-and-a-half years on Empress Of Fashion, interviewing Vreeland's family, friends and former colleagues, such as Glaswegian photographer Harry Benson and actress Marisa Berenson, as well as meeting the uber-glam editor of American Vogue, Anna Wintour.

"I got completely sidetracked by this extraordinary woman, who was doing these amazing exhibitions; the things she was saying. She seemed to come from a doughty line of female individuals very much like Consuelo's mother, the second subject of my dual Vanderbilt biography."

It was, she continues, as if Diana – pronounced "Dee-ana" – "just appeared before me". There was also a practical reason. The Vanderbilt book – which was to be a film until her friend, the writer Candia McWilliam, pointed out that it was a book – has been successful in the States. Her publishers were keen for her to write about another subject, "especially one who had crossed the Atlantic".

Well, Vreeland certainly did that. Born Diana Dalziel in Paris in 1903, she had a tall, handsome father, Frederick Young Dalziel, and a mother, Emily Key Hoffman, who was an American society beauty, one of New York's elite 400. Vreeland, though, delighted in her "medieval" Scottish clan origins. As a girl, she took the clan motto, "I Dare", seriously. As an adult she owned a print of the Dalziel coat of arms and sported the Dalziel tartan at the right sort of parties. Her father, to whom she was devoted, was not very Scots. His line of Dalziels came from England.

However, to say that Vreeland could be economical with the truth is a masterpiece of understatement. After all, she famously instructed her staff to "believe in the total authority of the imagination," notes Mackenzie Stuart who has admirably untangled the web of extravagant embroidery with which the visionary Vreeland embellished her life story more elaborately than any haute couturier might decorate a ball gown.

She herself used the word "faction" to describe her brand of truth – fact made more interesting. As Mackenzie Stuart notes, many of Vreeland's claims were nonsense. "I actually wrote 'tarradiddle', but my American editors didn't get it." It was, she explains, a constant challenge to separate fact from fiction.

The biggest whopper she told was that she grew up in France – she was seven months old when the family moved to New York, where her violet-eyed sister, Alexandra, was born. Like their mother, she was a beauty. Diana was not – with her slight squint, big nose and jolie laide features, she was "an ugly little monster", according to Emily, who was to become embroiled in a scandalous affair and a messy divorce, after "bolting" to Africa where she shot leopards with the caddish Scottish aristocrat, Sir Charles Ross, ninth baronet of Balnagown, universally known as "a stinker".

"Diana was a vulnerable child, who was saved by the power of her imagination," writes Mackenzie Stuart, the eldest of four daughters of the Scottish advocate and judge Lord Mackenzie-Stuart, who was President of the European Court of Justice, and his wife, Anne, "a powerful lawyer in her own right".

Vreeland, continues Mackenzie Stuart, deployed her imagination with great intelligence to defend herself against her mother's negative view of her. At the age of 14, she wrote: "I'm going to make myself the most popular girl in the world. I know I can succeed." At 21 she married a devastatingly gorgeous, sometimes philandering American banker, Reed Vreeland, with whom she had two sons. They moved to London, where they lived in a house she painted scarlet. She opened a lingerie shop and sold silken knickers to Wallis Simpson.

Back in the States, she was lured to Harper's Bazaar, where her gnomic utterances in her Why Don't You? column have been much parodied – the most oft-quoted being, "Why don't you rinse your blonde child's hair in dead champagne to keep its gold as they do in France?" Mackenzie Stuart's favourite is, "Why don't you have your cigarettes stamped with a personal insignia, as a well-known explorer did with this penguin?"

A pretty woman, with a crop of angelic curls, Mackenzie Stuart says it took a long time for her to get alongside Vreeland. "I felt the trick to her lay in the details, that you had to look closely. I simply had to ignore all her views about chronology and facts. When I started on the biography, I actually found her quite formidable, mystifying. I'm extremely glad that I never had to meet her – I don't think I could have stood the scrutiny.

"What has really fascinated me is the fact the role of the fashion editor is 100 years old. Women who do it successfully often do it for a very long time and occupy this position of enormous power, yet they have been sidelined both by feminist writers, who regard the fashion industry with great suspicion, and historians and biographers, who find it rather trivial – it can be pretty silly.

"Nonetheless, look at the myths that surround Anna Wintour – one does wonder whether it would happen if she were a bloke. I suspect not. So I felt these women have been overlooked and that piqued my intellectual interest. But what took me longer was finding out why so many people, like, say, Jacqueline Kennedy, found Vreeland so life-enhancing. That involved drawing closer to her and her way of looking at things which is enormously amusing. Once I did, I began to see how she dreamt her life into existence; it was inspiring."

Although she did not set out to become a biographer, Mackenzie Stuart has become fascinated with the lives of others. Married for 35 years to London Business School lecturer Professor Michael Hay, with whom she has two daughters, Daisy and Marianna, she's taking a break but thinks her next book might be about the shopping phenomenon.

Daisy, 31, is also a biographer, most recently of the well-received Young Romantics: The Shelleys, Byron And Other Tangled Lives, and is currently at Harvard writing a double biography of Benjamin Disraeli and his wife Mary Anne. Marianna, 27, is a musician and founder of the charity National Orchestra For All.

Finally, I ask Mackenzie Stuart what it was like being the first girl admitted to Fettes College, at the age of 17, in 1971, where she met one Tony Blair. Is it true that she was his first girlfriend? "Yes, we were childhood sweethearts," she laughs. "My father actually stepped in to stop him being chucked out – he used to say, 'Now that I see the chap's line of work, I think it would have done him good to have been expelled.'

"It was all about general insubordination. Tony really divided opinion sharply even at school. Some people found him irritating, others found him incredibly charismatic."

A bit like Diana Vreeland then.

Diana Vreeland: Empress Of Fashion is published by Thames & Hudson, £19.95. The documentary, Diana Vreeland: The Eye Has To Travel is out now on DVD from StudioCanal