“The river does not seem particularly intent on reaching its destination,” remarks the narrator of Diane Setterfield’s third novel, referring to the Thames. “Instead it winds its way in time-wasting loops and diversions.” In fact, where the river begins and which if any of its tributaries can be conclusively identified as the Thames itself is debatable. Lest you miss Setterfield’s point, she makes it explicit: “A river no more begins at its source than a story begins with the first page.”

Once Upon a River takes more than a few pages to begin properly, even though it kicks off with a promisingly dramatic event that electrifies the regulars at the Swan, a riverside inn in Oxfordshire renowned for the quality of its storytellers. On the evening of a winter solstice in the 19th century, a drenched man with a bashed-in face bursts through the door with what appears to be a large doll. He promptly passes out. The doll turns out to be the corpse of a little girl, and then not a corpse at all; to the astonishment of Rita, the local nurse and midwife, the seemingly pulseless, waxen child revives, and for weeks the habitués of the Swan can talk of nothing else. When the injured man – a character based on the real-life Victorian photographer Henry Taunt, who was celebrated for the images he made of the Thames – finally regains consciousness, he explains that the girl isn’t his: he found her floating in the water. The child herself does not speak.

The novel then diverts its unhurried attention to three plot tributaries of its own. One concerns a prosperous mixed-race farmer with a wayward adult stepson; another, a landowner whose marriage has withered after the kidnapping of his two-year-old daughter; the last, the fearful, half-simple housekeeper for the village parson. Very gradually, the story takes shape around the claim each of these parties makes on the girl. Is she the illegitimate child of the farmer’s stepson? The kidnapped daughter inexplicably returned after two years? Or the drowned sister of the housekeeper, miraculously restored decades after her death? The little girl herself seems largely indifferent to her surroundings and company, but she does exhibit an abiding fascination with the river.

Setterfield’s bestselling debut, The Thirteenth Tale, was a fusion of the 19th-century sensation novel with the modern-gothic morbidity of early Ian McEwan. Its intricate plot involved incestuous gentry languishing in a decrepit country house; an evil twin; murder, ghosts and references to Jane Eyre; and lashings of stories within stories. Once Upon a River is a considerably more wholesome affair. The primary characters are all good people, drawn in bold strokes without much shading; the influence here seems more Dickens than Brontë, albeit without the comic brio. The farmer, Robert Armstrong, is the love child of an earl’s son and a servant, and a paragon: strong, noble, educated, patient, devoted to his family, and so tenderhearted that when the river floods and he sets out on an urgent task, he can still spare a thought for “all the small land creatures, mice and voles and weasels, and hope that they had found safety”. A farmer with a soft spot for mice and weasels is a rare thing indeed, but then, rather like St Francis, Armstrong himself is beloved by all animals.

This is a far cry from the perversity and madness that gave The Thirteenth Tale its gothic atmosphere. Once Upon a River has a couple of villains, characters briefly seen but of an invigoratingly hateable badness and with no discernible redeeming qualities. Because these antagonists mostly lurk in the background, their motives unclear until near the story’s end, the conflict must be generated among the admirable leads: who is the little girl, really, and how did she end up in the river? Who will get to keep her? One of the novel’s uncanny touches is that everyone who encounters the child covets her, but they are mostly too unselfish to fight over her.

In place of the cobwebs, cinders and old books that perfume The Thirteenth Tale, Once Upon a River has mud, marsh and ale, drawing on the uncomplicated characters and enigmatic motifs of folklore. One shadowy recurring figure, the subject of much of the fireside storytelling at the Swan, is Quietly, a ghostly ferryman who gave up both life and death to save his own daughter. “He sees to it that those who get into trouble on the river make it safely home again,” Rita explains to the photographer, with whom she begins a romance hindered by her terror of childbirth. “Unless it is their time. In which case, he sees them to the other side of the river.” The unnamed narrator seems to be the collective voice of the village, recounting how the inn’s regulars rework the facts of the lost child’s case into a satisfying tale. “A story ought to go clearly in one direction, then, after a distinct moment of crisis, change to go in another,” the group concurs. And certainly this one does, but Setterfield takes her time. Or perhaps the novel feels leisurely because its mysteries and dramas are as mild and rolling as its setting. It cannot be called a page-turner, certainly not in the order of the previous book, yet ultimately it is a success. While the first third meanders and often had this reader wondering where it was going and what the point of it all might be, it does accumulate enough emotional power to make the revelations that finally come genuinely moving. In spots, the prose could use some polish (Armstrong is described as “weighed down by the intolerable weight of his grief” at one point), but originality has never been Setterfield’s strong suit. She serves you bread and cheese, but it is very good bread and cheese, the sort of meal that is often more satisfying than fancier stuff. Once Upon a River is a hearty paean to the Thames and the people who live on or near it, whose stories never truly begin or end, but flow on for ever, to a dimly imagined sea.

• Once Upon a River is published by Transworld. To order a copy for £11.43 (RRP £12.99) go to guardianbookshop.com or call 0330 333 6846. Free UK p&p over £15, online orders only. Phone orders min p&p of £1.99.