If there is a convincing argument for the continued existence of the theater – a subject at the core of Terrence McNally’s wistful and potent new play at Primary Stages, “Dedication or the Stuff of Dreams” – it is Marian Seldes’s thrilling performance as the drama’s chief mover, Annabelle Willard.

Mrs. Willard, an imperious, wealthy old woman who is dying of cancer, may or may not choose to bequeath the majestic old theater she owns to two lost souls who yearn to ensconce their amateur children’s theater in it: the shaggy, shlumpy Lou Nuncle (Nathan Lane) and his Mary Martinperky partner Jessie (Alison Fraser). Mrs. Willard does not like theater or children and particularly disdains children’s theater: “Put them together and I suppose a sneer is inevitable,” she scoffs, before ordering her driver (R.E. Rodgers) to pour her a martini. What she does relish, though, is making Lou and Jessie scramble in an agony of hope to prove their deservingness.

But when Jessie’s daughter, a wildly successful Courtney Love-style grunge diva (Miriam Shor), arrives with her faux-hawk-coiffed boyfriend (the hilarious Darren Pettie) and offers to pay for the theater outright, Mrs. Willard shoots her down. “I am 100% prepared to meet any reasonable price,” Ida says. “I’m not a reasonable woman. Two billion dollars,” Mrs. Willard says.

Mrs. Willard does not arrive onstage to toy with her needy courtiers for a very long time, but when she does one feels a sense of impending doom: She’s going to slaughter those defenseless thespians! In its dramatic effect, her entrance rivals the moment in Moliere’s “Dom Juan” when the statue of the commander comes alive, and appears at the banquet to exact retribution.

“Dedication or the Stuff of Dreams” begins in utter blackness: The audience sits for a good two minutes in the dark, a childlike state of suspenseful, curious ignorance. We overhear a back-and-forth between Lou and Jessie. When Jessie at last gives Lou a flashlight, he shines it toward the audience. As his beam of light flickers across tarps along the theater walls, we find ourselves seated within his dream.

We soon learn it is his birthday, and that, as a surprise, Jessie has wangled permission from Mrs. Willard to sneak into her theater – on the pretext that Lou has cancer, too. (He does not.) We sense their dread of Mrs. Willard, and begin to share it. The house lights have finally come on, and we see ordinary people, in comfortable, machine washable clothes – cargo pants, sweatshirts, T-shirts – looking like any number of adults (or toddlers) who might tumble out of an SUV on a trip to Wal-Mart.

There is something exposed, almost ridiculous, about career actors caught in non-performing moments, unmade-up, with rumpled hair. Think of the vengeful layouts of photo-ambushed stars in the gossip magazines: “Celebrities – they’re just like us – they buy groceries! They pump gas! They sweat at the gym!” Mr. McNally’s protracted display of his characters in this vulnerable mode makes the heart ache for them.

Lou and Jessie are people leading half-awake lives; they have doused their desires to avoid noticing their abandoned ambitions: You can almost smell the Xanax vaporing off them. Arnold (Michael Countryman), a friend of theirs who loves Jessie (actually, being English, he “lahvs” her), shows more vivacity, not understanding that, though Jessie is present, she isn’t really there, for him or for herself.

Under Michael Morris’s shrewd direction, showmanship never becomes upmanship: As Lou, Nathan Lane has reined in his outsize stage charisma, so that when he matches wits with Arnold, the contest feels equal. But the three characters are united in their belief in the redemptive power of theater. When Arnold finds a trunk of dress-up clothes, Jessie can’t resist putting on a fairy costume – “If I only I had a magic wand,” she later says. When Lou thinks he is unobserved, he stands center stage and makes a raw confession of faith in his profession, addressing an imaginary audience of children.

“For the precious time that you are here and we actors are before you, the future of the world is in your hands,” he tells them. He hadn’t gone to the theater as a child, he confides. His only escape from reality was to put on his mother’s fullest skirt, stand in front of her mirror and twirl to “The Sleeping Beauty.” This supremely private moment turns out to have been witnessed from a distant window by the terrible, all-seeing Mrs. Willard. Will she use it against him? She will.

When, near the end of the first act, the grande dame at last makes her entrance, she spooks Captain Lou and Miss Jessie and their friends. But Ms. Seldes’s effect on the audience is if anything, more powerful. Descending the aisle between the seats, her bearing regal, her pale, tailored outfit so flawlessly symmetrical it looks carved, she moves with deliberate, ruthless purpose, her strong mouth red and mobile on her white, mask like face; her eyes glinting cobalt.

As Mrs. Willard approaches the stage, making acid asides to her laconic driver, the house goes silent, both the actors on the stage, and the people in the seats seem to hold their breath. From the moment Ms. Seldes appears, her voice and presence make the layers of Mr. McNally’s intricate drama show themselves for what they are: She acts like a truth serum. Her character’s language is shocking, funny, always unsentimental; her words offer no comfortable euphemisms, no safe places.

When Lou tells Mrs. Willard he wants to put on plays that teach children “there is goodness and hope and love in the world,” she retorts, “Who loves you, Lou? Who ever loved you?” When he tells her he’s not dying of cancer, she says, “We all have cancer and we’re going to die. Now tell me about your dreams.” This is “Peter Pan” meets Beckett’s “Happy Days” – that is, “never grow up” versus “die.”

Ms. Seldes, the great interpreter of Beckett and Albee, was last seen on our stages two years ago, in “Beckett/Albee,” performing several one acts, including Beckett’s haunting “Not I,” in which, though only her lips were visible onstage, they and her voice enthralled the theater. In “Dedication or the Stuff of Dreams,” she comes to embody theater’s golden age, when stage actors were like gods; Lou and Jessie stand in for the Pollyannish present (or departing) thespian generation, whose actors are everyday people; grunge Ida and her punky boyfriend indicate the path of future dramatics, whose actors are practically demons. Mr. McNally gives new proof of the vitality of his chosen art form by showing that there is room on the stage for theater past, theater present, and theater future; and that if you are as good as he is, they can all be brought together behind one curtain.

Until September 18 (59 E. 59th Street, between Madison and Park Avenues, 212-279-4200).