Letting myself in with borrowed keys, I feel like the home help, or the health visitor come to call on Die Familie Schneider, Gregor Schneider's installation - if that is quite the word - in two adjacent terraced houses in London's Whitechapel. Or perhaps I live here too, but have somehow forgotten.

Ignoring me, the woman at the kitchen sink is taking an interminable time over a grubby plate. Perhaps we've had a row. I might as well be invisible. More likely I am dead, but don't know it yet, like Bruce Willis in The Sixth Sense. Maybe I got run over or mugged and fatally stabbed on my way round here from the nearby Artangel office where I had picked up the keys, but have yet to catch up with the fact.

Flippancy, however, won't do, even as a defence against the cumulative unhinging effect of Schneider's project, which opened last Saturday. Visitors must have an appointment; they are allotted 20 minutes each to make an unnerving visit to these two identical, unbearably normal side-by-side houses. On their return, these same visitors are shaken, upset, in need of consolation.

So it is that one wanders around numbers 14 and 16 of this ordinary London street, first one house, then the other. I open the fridge (processed cheese triangles, bottled gherkins), rattle through the bead curtain into the living room and plonk myself on the anaemic brown sofa. The houses are the same, down to the smallest details. The same number of cigarette ends in the living-room ashtray, the same jar of Vaseline and the same slimming pills in the bathroom cabinet. The same spot wiped clean on the wall at the turn of the stairs, the same cloying, unhealthy smells and viscous puddles in the basement. But they are not exactly identical, as we shall discover.

Gregor Schneider has called himself a painter, for want of anything better to say. Images, however, are singularly absent from the family setup in Whitechapel. Where are the framed photographs of loved ones, keepsakes, kids' pictures and scribbles? For there is a child here, somewhere or other. I heard a baby crying, inconsolable and far away, when I went down to the basement - unless it was just the wind howling in the flue. There is another room down there, with unopened packs of kitchen towels, biscuits, lollipops, stacked like gifts or as if for a game. I've seen the safety gate at the top of the stairs, the baby's changing mat in the bedroom. And the terrifying sexual graffiti, spied through the keyhole, in the attic of number 14.

Why is there a landscape turned to the wall against the living room wainscot? And nail holes, and nails without pictures in the hall corridor wall? It is as though pictures are prohibited here. But the house - renovated, refurbished, restored and distressed to an exact pitch of wear and use and unwholesomeness - is, it turns out, full of forbidden images. In fact, the entire house is an image, a duplicated, living image of itself and its occupants, whose stairs we tramp, whose thresholds we cross or recoil from, whose basements we crawl about in - not once, but twice.

The experience is more than one of deja vu, in Schneider's case, because some things are palpably different. One's entire field of expectation is also different as one enters the second house. Everything is the same. Nothing is the same. Perhaps because we live everything at least twice: once in the moment of the experience, and then, repeatedly, in memory. We are always revisiting the past and changing it. Schneider does the same. I have visited both houses on two different occasions. The more you know, the worse it gets.

It is difficult not to project a narrative here as you go up and down the stairs, step into the malodorous and malevolent bedroom, this cloying bower of nasty textures, grim wallpaper, gilded fittings and a mirrored fitted wardrobe. Who is the boy in the corner, sitting between the bed and the wall, the bin bag that covers his head rustling as he breathes? The first time, I nudge his foot to see if he's real. Is this sculpture or some horrible punishment, or a juvenile sex experiment about to go wrong?

Water's running in the bathroom; standing in the bath is a naked man, blurry and pallid behind the transparent shower curtain. Turned away and leaning over himself, he is masturbating vigorously, breathing hard. In this vertiginous moment, it is somehow easier to think that this is a picture rather than a shocking reality. I think suddenly of Francis Bacon. Some stories are easier to tell, while there are others so unconscionable that one's imagination swerves away from them, so as to defend one against them. I shall never have a hand-job in the bath again. Or quite possibly anywhere else, come to that.

Inevitably, given Schneider's use of live actors - the boys in the bedroom are small adults, the men and women twins - there is a sense of theatricality, and of staging, here. Whatever is being said is brought to life in the squeak of a dishcloth on a wet plate, a cough in a distant room, the tink of cutlery, the pained groans of a man masturbating. As if the setting itself weren't enough - the dour brown-and-cream paintwork, the soulless emptiness, the meagre pleasurelessness of it all.

There's nothing here to alleviate the stultifying air of boredom and implied violence, save a copy of the Sun and a telly guide. Aren't the details so far all a bit obvious, as signifiers of a class, of low expectations? But what of these books on a side table: Three Puritan Plays, by George Bernard Shaw; To Kill a Mockingbird; Lord of the Flies; Twelfth Night. Why the Shakespeare? Is this a clue? Perhaps we are all wise fools here, like Feste in the play. The trouble is, Die Familie Schneider know more than we do; they know things we don't ever want to know. In the basement of number 16, a cot mattress is carefully laid in the coal hole.

It is difficult to treat this work as illusion, even a theatrical illusion. Existing on an equal level with reality, it becomes a reality in itself. I have to keep reminding myself that that this is an artwork, as much as I also try to convince myself that I am not a ghost walking invisibly through a living tragedy. The desire to be invisible, to float unseen through the intimacies of other people's lives, is an almost universal fantasy. It is, after all, what most novelists do, except they mostly do it in their heads. But what child or adolescent has not rummaged in the secret world of adults, looking to uncover some secret, some knowledge or other? Adults do the same, in the name of policing their children's lives. Some never get over it.

Schneider has spent much of his adult life building and rebuilding the house he grew up in, in the town of Rheydt, near Mönchengladbach, ever since his parents moved out in his teens. It may be significant that Rheydt is traditionally Protestant in an otherwise largely Catholic area. In what he has renamed the Totes Haus Ur, or Dead House, he has constructed a labyrinth of insulated, soundproofed rooms - rooms for every imaginable and unimaginable purpose. Dead rooms for a living death, with walls built in front of walls, pointless corridors, blind windows, rotating rooms and rooms from which, if you are accidentally locked in, there is no escape. He has at various times demolished, transported and reconstructed portions of this frightening dwelling in galleries and museums around the world. It appears not so much a project as a life. And perhaps Die Familie Schneider is a kind of parodic self-portrait or autobiography.

Part of my own reaction to this work is the sense it gives me that I am walking through a passage in my own past life. The leaden atmosphere is familiar to me, having spent part of my own childhood in surroundings almost as lustreless, and in an atmosphere that also had a timbre of extreme sadness, repressed feelings, secrets, the unspoken.

Die Familie Schneider is perhaps at times a bit over-egged, but shocking nonetheless. You can't avoid yourself in here. There are other kinds of families whose lives might seem brighter, or better off, or less obviously damaged than the Schneiders', but whose stories, like some dreadful trauma, are endlessly replayed without resolution or consolation. This is an unbearable, unforgettable work.