Southern towns have provided the settings for some of America's most celebrated fictionstories by authors like William Faulkner, Eudora Welty and Flannery O'Connor. Now Mississippi native Brad Watson has created a town that's earning him comparisons to those famous writers. He's the author of "The Heaven of Mercury," a critically acclaimed novel that was recently named a fiction finalist for this year's National Book Award.

Brad Watson grew up in Meridian, Mississippia southern community of some 40,000 people. Memories of his home town helped inspire his first novel. He says while Meridian is bigger and more thriving, in other ways it resembles the imaginary town he calls Mercury: "Like Mercury it's a town that really hasn't grown a lot in my lifetime or didn't grow a lot throughout the twentieth century. It started out as a town that was going to be prosperous and big. It was supposed to be one of the major towns of the South, and it didn't turn out that way," he says. "So it's a town that hung on by its own wits. It's architecturally an interesting town. It think it's an interesting mix of people, so I had all these impressions of it I wanted to get into fiction."

The novel had another source of inspiration as well, Brad Watson says, and that was his grandmother. "She was very much the vital center for the family, the locus for our own sense of our identity. And she told really good stories, funny ones about her friends and family members, things that were seed pods that I could plant and allow to take on imaginative shape from there," he says. "She lived from 1901 until 1995, and most of it in that area, so the stories she would tell me not only gave me a sense of family history from her perspective, but also a unique historical perspective on the town."

In "The Heaven of Mercury" the author's grandmother becomes a woman named Birdie Urquhart. Like his grandmother, Birdie has a lot of vitality, a strong will to survive, and the ability to put up with her husband's many infidelities. But Brad Watson added an imaginary twist as well. A local newspaper editor named Finus Bates falls in love with Birdie when they're young, and loves her his entire life, even though both they marry other people. Their story frames the stories of other townspeople, everyone from a black medicine woman to the local undertaker.

As characters die over the decades, they stay on in the story as ghosts, sorting through their old memories or haunting the memories of people they've left behind. Brad Watson believes those who die leave an especially strong imprint on small towns, where everyone knows everyone else. But he says the story also reflects the way we all remember the dead. "There's such a strong sense in our minds of the presence of those people we've known in the past, so in the book the presence of these characters who exist beyond natural life are in a sense a metaphor for me. But I liked writing about them as if it was real because it was a way to make the metaphorical possibility more realistic and immediate."

And while the town itself is slowing dying as well, the characters keep its spirit alive, as they weather family feuds, broken hearts and local scandals. Brad Watson says that's the meaning of the title, "The Heaven of Mercury", "It's this sense of the timelessness of the place, the sense of it being alive with the presence of people who have passed through it and still remain there in one way or another, either in the minds or memories of others or in some realistic spiritual sense. It has to do with the characters' hopes and dreams, which are thwarted and the way in which they had to compromise. There's a kind of heaven I think in arriving at a kind of personal peace, even though it's not the peace which involves having gotten what they wanted. It's a peace of having accepted what's happened to them and even trying to see some sort of beauty in that."

To create his imaginary town, Brad Watson went back and walked the streets of present day Meridian, Mississippi. He also read local histories in search of colorful anecdotes. But he mostly relied on his imagination to create his charactersand some were more challenging than others.

He says he had special difficulty writing about a black house servant named Creasie, who nurses her private sorrows while presenting a mask of quiet indifference to the world: "It was challenging because there you have a black character in the middle of the twentieth century in the Deep South whose daily life involves necessarily a great deal of dissembling. In order to survive and prosper to whatever degree she can, she has to keep up a certain front. So it was important to me to realistically represent the way she's perceived by the other characters, particularly the white characters, but also look at the way she is on her own, without all those social constraints to see her as a human being, because as she's represented to them, she's not really a whole human being."

Brad Watson says it was also challenging to turn his grandmother into a fictional character. Although he knew stories about how his grandfather had courted her, he invented the other man who loves her his whole life. Then recently he made a surprising discovery. "After the book came out my mother suggested she thought there had been a man like Finus, who had an interest in her during her marriage and afterwards, but I never saw this guy or saw any evidence of that myself. And it was one of the things that was most difficult for me to make up in the book, because I had a hard time seeing her as a romantic figure. She was my grandmother."

And what would his grandmother say about the novel she helped inspire? Brad Watson believes she might have repeated what she said to him once before. "When she read the first story I ever published, she said, 'That's okay, I know you're a good boy anyway.'"

Brad Watson is the author of "The Heaven of Mercury," one of this year's fiction nominees for the National Book Award.

"The Heaven of Mercury" was published by W.W. Norton and Company, 500 Fifth Avenue, New York, New York 10110.

This is the third in a series of reports on nominees for this year's National Book Awards, to be presented November 20