‘It was kind of a lost paradise,” JRR Tolkien told the Guardian in an interview in 1966. “There was an old mill that really did grind corn, with two millers, a great big pond with swans on it, a sandpit, a wonderful dell with flowers, a few old-fashioned village houses and, further away, a stream with another mill.”

Four miles south of central Birmingham in the Hall Green area lies the inspiration for Tolkien’s Shire – the former hamlet of Sarehole. Tolkien lived here from 1896, between the ages of four and eight. “I loved it [Sarehole] with an intense love,” he said. “I took the idea of the Hobbits from the village people and children.”

Sarehole Mill, a 16th-century working watermill powered by the River Cole, is the hamlet’s centrepiece. Early references to the mill feature in the 1937 bestseller The Hobbit, where Bilbo Baggins sets off on his great adventure by running “past the great Mill, across The Water, and then on for a mile or more”. Today, the mill is a museum with a permanent Tolkien exhibition, and is the starting point of a guided Tolkien walk.

Arriving with a wizard-like “social-distancing staff” and a face shield, my guide is Wayne Dixon, a Lord of the Rings boffin who looks like a Covid-compliant, dark-haired Gandalf.

John Ronald Rueul Tolkien was born in Bloemfontein, South Africa, in 1892 to Arthur and Mabel, who had emigrated from Birmingham to advance Arthur’s career. But in 1895, while Mabel and her two sons were on a brief trip back to Sarehole to see family, Arthur contracted rheumatic fever and died in South Africa. The family chose to stay in the then-Worcestershire hamlet of Sarehole.

“This is one of the only parts of Sarehole that remains untouched,” Wayne says, as we venture into a broad, grassy meadow with a large pond at its foot, and the mill’s redbrick chimney poking through the treetops. “A young John, along with his brother, would explore this land and swim in the millpond, which was alive with swans and other wildlife. They would forage for blackberries and be chased away by the miller and his son, whom John later described as ‘characters of wonder and terror to a small child’.”

These encounters inspired the creation of Hobbiton miller Ted Sandyman, detailed in Tolkien’s 1977 biography as the “white ogre”, the son of another miller who “frightened the boys with his white dusty clothes and sharp-eyed face”. There are also parallels with Frodo Baggins stealing mushrooms from Farmer Maggot’s fields. The name Baggins is drawn from a former landowner, farmer Buggins of Sarehole Farm.

As we pass through the meadow, Wayne talks about his grandfather, who lived nearby. “When he cut his hand open he asked for a gamgee wrap,” Wayne says. “Gamgee is old Brummagem dialect for a bandage.” Gamgee tissue was invented in 1880 by Birmingham surgeon Joseph Sampson Gamgee – the surgeon’s widow lived opposite Tolkien and his aunt in a later city dwelling – and Lord of the Rings character Sam Gamgee takes his name from the cotton and gauze dressing.

On the edge of the meadow is 264 Wake Green Road, Tolkien’s first Birmingham home. One of the few houses to remain from his childhood, it’s a fetching mock Tudor house just across a busy stretch of road leading to Moseley. The house’s curtains twitch, but Wayne tells me above the traffic noise that the family are used to groups gathering outside.

We then pass through suburban streets to the hushed entrance of Birmingham’s most enchanting realm: Moseley Bog, which Wayne tells me was the inspiration for the Old Forest, on the edge of the Shire. “It was not called the Old Forest without reason, for it was indeed ancient, a survivor of vast forgotten woods,” Tolkien wrote in The Fellowship of the Ring.

The Bog sits under a canopy of centuries-old trees, like those Old Forest trees whose trunks Tolkien described as “of innumerable sizes and shapes: straight or bent, twisted, leaning, squat or slender, smooth or gnarled and branched”. Apart from the addition of a wooden walkway, Moseley Bog looks much as it did in Tolkien’s day. Welly-wearing children are paddling in the same brook and the more adventurous are climbing the same twisted trees.

In normal times, Wayne’s full Tolkien tour takes in other parts of the city, and he encourages those who take the walk to continue on to Edgbaston and the city centre with the Birmingham Tolkien Trail.

Tolkien later stated in the foreword to the second edition of the Fellowship of the Ring that Sarehole was “being shabbily destroyed before I was ten”. Moseley Bog managed to avoid civilisation, but much of Sarehole didn’t; the bog’s surrounding area consists of postwar prefab houses, while the nearby farm is now a petrol station. A lost paradise? Perhaps.

“Tolkien often spoke of forests and woodlands more than people,” says Wayne. “It was clear that he valued the green spaces around him more than anything else.”

• Tolkien Walks £10pp. Due to Covid-19 restrictions, there are currently no walks scheduled; for information on future dates, sign up for the newsletter at birminghammuseums.org.uk. A self-guided tour is available upon request