When David Lynch released “Lost Highway” in 1997, critics and fans were ready to yawn at the filmmaker’s mysteries. Several years had passed since “Twin Peaks: Fire Walk With Me” disappointed — or frightened — fans of the groundbreaking TV show. In the meantime, Quentin Tarantino had imprinted on crossover eyeballs his own iconoclastic mix of pop Americana, dislocated storytelling, and intersecting worlds and underworlds laced with the violent and the bizarre.

Mr. Lynch’s efforts in “Lost Highway” were treated like a style that had played out, but this was an inevitable trajectory for an aesthetic in which literal comprehension wasn’t always the point, or even possible. One Newsweek writer described Mr. Lynch’s hold on popular culture in 1990 this way: “Thanks to ‘Twin Peaks,’ trendiness is as simple as turning on the TV each Thursday evening and then, at work the next day, pretending you understood what the hell was going on. (‘Everyone at parties is talking about it,’ says George Stephanopoulos, 29, a staff assistant to House Majority Leader Richard Gephardt.)”

But “Lost Highway,” finally released today in a widescreen DVD by Universal, not only lights the way to Mr. Lynch’s spellbinding “Mulholland Dr.” (2001), but stands up as a work that is at once disturbingly sensuous and heartless. The plot’s split-identity reboot and luridly realized paranoia may feel more intelligible in 2008 (especially after the three-hour free fall of Mr. Lynch’s most recent film, “Inland Empire”), and there are at least two mind fornications in the film that rank among the director’s best.

In Mr. Lynch’s so-called “psychogenic fugue,” reality unravels for black-clad jazz saxophonist Fred Madison, embodied by Bill Pullman with dyspeptic dread. One day, Fred and his wife, a brunette-banged bombshell named Renee (Patricia Arquette), receive a grainy videotape of their dim, obtuse-angled modernist house. After another tape arrives, Fred has a space-bending encounter at a party with a spooky guy in whiteface without eyebrows (Robert Blake, compared by some to Mickey Mouse and Dracula).

When a third tape seems to show Fred writhing over Renee’s dismembered body, he is sent to prison, at which point Mr. Lynch pulls another rabbit out of his hat.

While locked in a cell, Fred transforms into Pete, a young punk mechanic played by Balthazar Getty. Pete lives with his denim-clad parents (Gary Busey and Lucy Butler), goes steady with Sheila (Natasha Gregson Wagner), and is the go-to Mercedes specialist for gravelly voiced mobster Mr. Eddy (Robert Loggia).

The plot implosion loops back as Pete is seduced by Mr. Eddy’s moll, Alice, played by … Patricia Arquette, this time blond. Mr. Eddy, in turn, may or may not be (a common phrase in Lynch recaps) the same person as Dick Laurent, an éminence grise from the Fred segment. To cap it all, Pete has amnesia about some awful night, which his parents refuse to recount but might be the pivot to this fugue. “Funny how secrets travel,” to quote the opening of the frantic David Bowie song “I’m Deranged,” which haunts the title credits.

Those credits zoom over an iconic image from film noir: a highway at night, divider lines flickering down the screen like a mind racing — fleeing, arriving, wandering. As he had done before in “Blue Velvet” and would do again in “Mulholland Dr.,” Mr. Lynch reached into an American subconscious with his use of such cinematic and musical references. Renee’s Barbara Stanwyck-esque bangs recall “Double Indemnity”; the doppelgangers evoke “Vertigo”; a vision of a burning beach house suggests “Kiss Me Deadly,” and Pete’s neighbors have the same dog and picket fence from the opening of “Blue Velvet.” Fifties-era songs are remade: Lou Reed tackles “This Magic Moment,” Marilyn Manson does “I Put a Spell on You,” and the movie’s very title alludes to Hank Williams’s bereft lament and warning about becoming “a rolling stone all alone and lost.”

The subterranean references reinforce the jealousy and guilt at the core of Renee and Fred’s loveless relationship, whereas Pete’s risky exploits can be seen as Fred’s nostalgic fantasy (part of what Jim Hoberman saw as a “bad-boy rockabilly debacle”). Peter Deming’s Cinemascope photography maroons us in the darkness of the couple’s house and finds queasy textures in Mr. Pullman’s face and the walls; later, tracking Pete, the photography sours purposefully as the wincing greaser gets pulled into Alice’s scheming.

Mr. Lynch’s vision of the 1950s suburban-American soul that can’t escape evil is far richer (and more complex) in “Blue Velvet,” and the sordidness surrounding his femme fatale (porn films, imminent violence) is unpleasantly conceived. But the conviction and intensity applied to Ms. Arquette as an object of desire yield a particular horror about obsession and fury literally wiping out identity. Despite the deadpan-comic oddity (or junk moments like Mr. Eddy pistol-whipping a tailgater to teach him traffic rules), there’s a warped, unhappy strain here that’s potent.

The macabre ending of “Lost Highway” shunts us back to the desolate highway of the opening credits, feeling no more stable than when we started. Though once dismissed as a parody of Lynch’s obsessions, “Lost Highway” deserves its underdog niche appeal. The film has its rabid supporters: “Like a blow to my brain stem,” proclaimed Nobel laureate Elfriede Jelinek, who wrote the libretto for an opera adaptation of the film; Greil Marcus and Slavoj Zizek were each driven to publish free-associative rants.

But maybe a strike can be leveled against “Lost Highway” for what Mr. Lynch could have done instead: One rejected project during his dry spell in the 1990s was something called “Dream of the Bovine.” The pitch was simple: a comedy about “three guys who used to be cows.” Clearly the world will continue to be surprised by Mr. Lynch.