Since the intriguing Eastern utopia was first described 80 years ago in James Hilton's novel, the location of Shangri-La has been a mystery. Explorers have gone in search of it; the Chinese government has tried to manufacture it. But, after months of research and a 6,000-mile journey, we think we may just have found it.

There is a pig at large on the streets of Shangri-La. It's black and hairy, and it's snuffling along quite happily when a sudden shower of masonry sends it bolting away up the hill. Above, a man with a sledgehammer pounds at the remains of a wall. He gives it a few more jarring thumps, and then stops to draw on the cigarette poised on his lower lip—but the hammering sound continues. It's echoing from any one of a hundred construction sites in the surrounding streets, where countless other sledgehammers are at work. Up and down the Shangri-La old town, original wooden houses—some of them hundreds of years old—are being torn down, and new "authentic Tibetan-look" trinket shops are being erected. The constant drone of sawing and drilling fills the air like dust.

This may not sound much like your idea of Shangri-La, but I assure you we're in the right place. The signs say so. They used to say "Zhongdian," but in 2001 this obscure town in China's northwest Yunnan province was renamed to attract tourists and revive the region's flagging economy. And it has done the trick. Just last year, 2.6 million tourists came here in search of an untouched Tibetan paradise.

Given the level of destruction/construction going on, the "untouched" bit seems rather farfetched, but Zhongdian as Shangri-La is not a totally ridiculous idea. It has some Shangri-La-esque qualities to it—the golden-roofed Songzanlin Monastery on the hill is a very good start, for example. But where exactly is the big pointy mountain? And the Spring of Eternal Life—where's that? Perhaps I should explain…

Shangri-La was an invention of British author James Hilton in his 1933 novel, Lost Horizon. Hilton's Shangri-La is a beautiful, secluded idyll in the Himalayas, shielded from the troubles of the world, where people live to over 200 years old. A mystical monastery overlooks a lush valley and Tibetan village, all below a cone-shaped mountain called Karakal.

Before I get too far into it, let me take you back to the beginning of our own adventure, several months ago, in the birthplace of the Lost Horizon story itself—not in the glorious sweep of the Tibetan high plateau, but in the humdrum gray surroundings of South Woodford in London, England. Here, in the early 1930s, in a small neat house on Oak Hill Gardens, James Hilton sat and dreamed of Shangri-La.

He never went to Tibet. He never even made it to Asia. Yet the world he created was so evocative that not only did Shangri-La become a byword for the ultimate Eastern paradise (inspiring, among other things, a very successful Hollywood film, a very unsuccessful Broadway musical, and any number of questionably paradisiacal cottages across Great Britain), but also—and here's the interesting part—people came to believe it really existed. Exists, actually: present tense.

Granted, there are the less authoritative types—one Indian gentleman I heard of not only claimed to have tracked down Shangri-La but was adamant he'd seen both Jesus and Muhammad there as well. But rather more difficult to discredit are the serious, bearded men in therma-fleece representing National Geographic and the like, who occasionally emerge from the Himalayan wilds to announce that Shangri-La has at last been found. For real, this time.

The question is, why are people obsessed with proving that this or that part of the earth is the "real" Shangri-La when the author of this fictional idyll never came anywhere near these places? Are they simply crazy? Or, just maybe, do they know something we don't?

The author's house gives no clues, so the next port of call is the northern English city of Nottingham, where the founder of the James Hilton Appreciation Society, Dr. John Hammond, lives. This gregarious elderly gentleman has spent his life immersed in all things Hilton, so if anyone is going to point and laugh at our Shangri-La claimants, it is surely him. He ushers me into his book-lined study and the interview starts off promisingly. "The only place you will ever find Shangri-La," he says with conviction, "is in the pages of this book." And he taps his copy of Lost Horizon, just in case there's any confusion. Right, I think. They're clearly all nuts, then. I am just starting to congratulate myself on having cracked this mystery before lunch—then he continues, with a "But…."

It turns out that James Hilton didn't just sit quietly in his study in South Woodford; he also spent weeks at the British Library reading up on Tibet. There, he drew on a variety of sources, but most influential were the National Geographic articles of one Dr. Joseph Rock, an eccentric Austro-American explorer who lived in southwest China in the 1920s and 1930s. "If you follow Dr. Rock's explorations," John says, "you might just find something like Shangri-La."

So begins an exhaustive, exhausting blur of Internet searches, phone calls and e-mails, all to track down exactly where this Joseph Rock character went and where our most likely Shangri-La location might be. And it's more difficult than you might think. There are "Rock areas" all over southwest China claiming to be Shangri-La—where do we begin? It doesn't help that almost every town and village in the region has at least three different names, each with different spellings and pronunciations (none of which is generally recognized by any Chinese travel specialist who can speak English). On top of that, e-mails sent to China are screened for prohibited content, so they may or may not reach the person you're trying to contact. Usually not, as I discover.

Our investigation is spiraling, in danger of getting nowhere, when suddenly a guardian angel in the rather unlikely form of a chain-smoking, six-foot-three British expat called Jason appears. According to his e-mail, he has been operating a travel business called Haiwei Trails in this area of China for years, and not only is he familiar with the work of Joseph Rock—he can take us directly to the man's house. Bingo.

Days later I arrive in the town Rock called home for 27 years—a place named Lijiang—with a head full of jetlag and a July 1930 National Geographic clutched in my hand. We greet Jason at the airport, climb wearily into our waiting LR3 and head just out of town to pick up the trail. Rock's house is now a small museum, overlooked by the magnificent Jade Dragon Snow Mountain.

We're immediately disappointed. The museum seems to house little more than a series of Rock's photographs, most of them published in my own copy of National Geographic. They're interesting enough: Rock pictured in sensible suits and glasses standing next to an array of lavishly dressed lamas (who occasionally sport amusingly large fur hats). But it's not what we've come for.