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Priya Parmar is talking about plumbeans. That's a code word from her childhood, meaning unexpected, risky decisions. It comes from a children's book her mother liked to read to her three children: The Big Orange Splot by Daniel Pinkwater. Mr. Plumbean lived on a "neat street" until a seagull happened to drop a can of orange paint on his house. Much to his neighbours' alarm, he decided to paint his house a myriad of colours in response. "And then all the neighbours come along," the American-born Parmar says, telling me the story. "And he says, 'My house is me and I want my house to be all my dreams.' And so all of them then go home and change all their houses, too!"

I had asked her what a plumbean was because that's what she calls her blog about her writing life – The Plum Bean Project. She has had many plumbean moments in her 40 years of life, she goes on to tell me, but perhaps the biggest is the recent publication of her second novel, Vanessa and Her Sister, a fictionalized account of the relationship between Virginia Woolf and her older sister, Vanessa Bell, told in made-up diary entries and letters.

"Oh, I'm terrified," she squeals from the floor of the main room in her two-storey apartment in South London. She is curled up on a rug in the cozy, candle-lit room under the eaves of the roof with skylights looking out over the city. There is hardly any furniture: one shabby-chic sofa with big pillows and some stools at the counter of the open-concept kitchen. A string of fairy lights left over from her birthday celebrations with her husband and two stepdaughters hangs across the space near the ceiling.

There's a shy, girlish quality to Parmar – her confessional guilelessness, her whispered answers or squeals of delight – that belies the seriousness of her literary endeavour and her impressive academic qualifications. "About a third of the way through the book, it struck me as the most presumptive thing I could ever have done. I stopped cold for about a month while I panicked," she explains, cringing at the memory. Vanessa Bell, who was a painter in the Bloomsbury Set and Virginia Woolf's older sister, didn't keep a diary. "I wanted to be in the first person, not the third person," so she invented the entries. "I thought, 'What am I doing?' And the first time I realized that I had set myself up to have to write a letter from Virginia Woolf, [I thought], 'Wow, what am I doing here? This is a gargantuan mistake!'"

But beneath her anxiety, there's a cool confidence, a quiet knowingness. What she offers is not so much a humblebrag as a sensibility closer to sheepish pride. It's as though she feels she has to be slightly apologetic about her enormous creative gift. The novel has received widespread critical acclaim, including a glowing review in the New York Times Book Review. Philippa Gregory, the British historical-fiction author, has mentored Parmar. "She is like a godmother," she says in a hushed voice.

A career as a novelist wasn't even in her plans. "I wasn't one of those kids who had short stories under the bed," Parmar confesses at one point. She was thinking of a career in academia. A graduate of Mount Holyoke College in Massachusetts, where she studied under the late poet Joseph Brodsky, she did a year at Oxford University as an exchange student and then enrolled in the University of Edinburgh in Scotland to complete a masters and PhD in English literature and theatre.

In another plumbean moment, while a graduate student at Edinburgh, she approached Eve Ensler, playwright of The Vagina Monologues, about working with her on her next work, The Good Body. Ensler agreed, and off went Parmar to New York. In 2011, she published her debut novel, Exit the Actress, about Nell Gwyn, the plucky English actress in the Restoration period who was a mistress of King Charles II. She had worked on it for six years in her spare time and while completing her doctorate.

Parmar is one of those people who seems more engaged in her inner, intellectual life than in her social one. She never watches TV and can't work her digital devices without the help of her husband, who works in the tech world. As a child, she didn't learn to read until she was almost 10. The eldest child of a South Asian businessman and an American mother who worked as a magazine editor, she "was in a scary, high-pressure Washington, D.C., school so I learned to memorize instead of read," she tells me at one point. To this day, she memorizes 200 lines of poetry every day, a habit she developed at Mount Holyoke under Brodsky's tutelage.

The idea about a fictional account of the relationship between the famous Stephen sisters, Vanessa and Virginia, came when Parmar was reading some of Vanessa Bell's correspondence. It was well known within the Bloomsbury Set, who were famously promiscuous and documented much of their lives in diaries and letters, that Vanessa's husband, Clive Bell, had an affair with Virginia Woolf. "I didn't know if the sisters ever acknowledged [between them] the affair … and it's all over Virginia's and Clive's correspondence and yet completely absent from Vanessa's. When I was researching this, I realized what my book was about – about this choice this woman has to make: whether or not to forgive her sister."

Deftly told through Vanessa's fictional diaries and letters from members of the Bloomsbury Set in prewar London – including Virginia and Vanessa's brothers, Thoby and Adrian Stephen; Clive Bell; Virginia's husband-to-be, Leonard Woolf; and writers E.M. Forster and Lytton Strachey, among others – the novel captures the youthful, bohemian mood of the time.

As Parmar neared completion of the writing process, she decided it would be good to have the blessing of the Stephen family descendants. She sent handwritten letters to Virginia Nicholson (Vanessa Bell's granddaughter) and Olivier Bell (the widow of Quentin Bell, who was Vanessa Bell's son and a biographer of Virginia Woolf), outlining her book and her academic qualifications. "I agonized over these letters," she confesses. But she heard nothing.

Then, last spring, deep in the editing process, Parmar received an e-mail from her British editor, who told her that Virginia Nicholson had been trying to reach her for a year unsuccessfully. "Within 10 minutes, we were corresponding via e-mail," Parmar tells me. She attached her manuscript as a Word document, much to her editors' alarm when she later confessed that she had. Nicholson asked to meet. Terrified, she agreed. "All I could think of was that I call her grandfather a 'pink pig' and that I mentioned her grandmother's boob." The first thing Nicholson said was, "'My grandmother would have used the word "napkins."'… She had all these wonderful word changes." But otherwise, she had no objections.

"It takes an incredible amount to be a Woolf scholar, and I am not. I have a strong background in literature but I would never call myself a Woolf scholar. These are people who are so invested in this person. And this Virginia I present is very different from many of theirs, and [the book] is about a part of her life that has fallen out of her mythology. The madness is all saved for the end, the suicide. People don't focus on the terrible difficulties she caused through her life.

"I do it all by instinct," Parmar continues about her writing process. "There's a feeling of them snapping into place when it's the right thing. … With this book, I haven't always been able to see my way to the end. … I knew four steps ahead, but not 10 steps ahead. It was just a matter of hoping that my luck would hold."