Graffiti artists let loose in the Scottish National Portrait Gallery

Only John Flaxman's 1828 statue of Robert Burns remains, and even the Bard is hidden away in a large wooden packing case, waiting to be moved into storage. His plinth sits in another box nearby.

The SNPG officially closed for renovations earlier this year, and it isn't due to reopen until November 2011. For a while, it seemed as if the building would lie empty for this year's Festival season – a sad fate for such an iconic landmark – but then some bright spark came up with the idea of letting graffiti artists loose on its ground floor exhibition space. The gallery was about to be turned into a building site anyway. What was the worst that could happen?

National Galleries outreach officer Richie Cumming was put in charge of the project, entitled Rough Cut Nation.

"Obviously a few people in the organisation were a wee bit apprehensive about it," he says, "but the initial idea came from the galleries – they decided they wanted to use the space for something in August. Then it was suggested that we could get graffiti artists in, and from there it snowballed into something bigger."

As an outreach officer, part of Cumming's job is taking works from the National Galleries' collections and making them relevant to new audiences. To this end, he and his colleagues came up with the idea of creating a contemporary, street-art version of the William Hole mural that dominates the gallery's Main Hall. Completed between 1889 and 1898, the mural depicts a procession of famous Scots in reverse chronological order, starting with Thomas Carlyle and including such iconic figures as David Livingstone, James Watt, Robert Burns, Adam Smith, David Hume, the Stuart monarchs, Robert the Bruce and Saint Ninian. It is an encyclopaedic and, some would say, highly conventional portrayal of Scottish history; needless to say, the artists working on the modern-day reinterpretation of Hole's masterpiece seem to have very different ideas about how Scotland should be represented.

On an expanse of wall that has cradled portraits by some of the biggest names in art, 22-year-old Martin McGuinness and Fraser Gray, 23, are hard at work with spraycans, putting the finishing touches to a sombre, 12-foot high portrait of a woman.

"She's a cancer sufferer," says McGuinness. "She's better now, but she's been in and out of hospital for a lot of her life."

In preparation for their SNPG residency, Gray and McGuinness visited several seriously ill patients at Ninewells Hospital in Dundee and asked for permission to photograph them. Some of those who consented will now be supersized and immortalised on the gallery walls.

"It's easy to romanticise historical battles," says Gray, "but nobody wants to romanticise about the battles that these people are fighting now."

On the opposite wall, McGuinness and Gray have completed a portrait of a male patient from Ninewells on an equally monumental scale.

"His name's Robert Bruce," says Gray, "which is quite convenient for the exhibition. He was in hospital after a heart attack – he'd pretty much drank and smoked himself to death. When we spoke to him didn't sound very optimistic about his life. He'd come to the point where he happily admitted, 'I'm in here because of me – I drink too much, I smoke too much.' I think a big part of Scottish culture that never gets portrayed is that it is quite self-deprecating. We're always going to focus on the negative before we focus on the positive."

"Hundreds of years ago," Gray continues, "or even a couple of generations ago, everyone knew someone who had died in a war. These days we don't have that relationship with war, but everyone knows someone who's died of cancer, everyone knows an alcoholic or someone who's eating themselves to death. Maybe our Robert the Bruce defines modern Scotland a little bit better than the original now."

Gray and McGuinness are firmly rooted in the Scottish graffiti scene, but not all the artists taking part in Rough Cut Nation come from a street art background. Kirsty Whiten is best known as a painter, but for this exhibition she's been experimenting with the paste-up technique pioneered by French street artist Blek le Rat and perfected by Bristolian spraycan legend Banksy, making black-and-white copies of some of her more eyecatching canvases and then sticking them to the gallery walls like fly posters.

"Apart from a little show at Pageant, this is the first time I've tried paste-ups," she says. "The great thing about working this way is that, instead of doing one really time-consuming bit of live painting, I can pick out lots of different motifs from my work."

Whiten has alsochosen to focus on ordinary people. Several of her paste-ups are based on portraits of residents of Edinburgh's Dumbiedykes housing estate, notably a gang of "schemie-centaurs" (half-ned, half-horse) and a couple of youngsters fooling around with toy guns.

"A few years ago I did a collaborative thing at Dumbiedykes," she says. "We got people to volunteer to be photographed – they got to choose where they were and how they were dressed and what they were doing. We took lots of photos and then I used those as the basis for the paintings. I've done them as paste-ups here because they seem to be totally relevant – I think they're my most genuine Scottish portraits."

As someone who usually works fairly traditionally, within the confines of a piece of canvas, how has Whiten found working with a group of graffiti artists on what is effectively one huge, sprawling, collaborative artwork?

"I've actually got a lot in common with these guys," she says. "It's really satisfying to be working with people who are unashamedly graphic. Artistic collaboration can be so pretentious, but this is literally, 'How are your things going to be on the wall next to each other, how are they going to talk to each other?' You've got to expect your work to be overlapped and covered up, but everyone's been really friendly and open so far – maybe that's just the graffiti way."

Rough Cut Nation has been produced by an all-star cast of around a dozen young artists. Other notable participants include Edinburgh graffiti hero Elph and award-winning designer Jo Basford, formerly of the studio Timorous Beasties. Like catalysts in some crazy, colourful chain reaction, they have been ducking in and out of the gallery for the past month, reacting to work and then inspiring others with their own interventions. Cumming, who is contributing work himself, has been tasked with refereeing the chaos.

"We've not really been bagging spots as such," he says. "People have been coming in behind each other and over the top of each other, so we're kind of treating it as one big work. I've just asked everyone to be respectful of what other people have put up, and we are theming it slightly, in that some areas are going to be about different things – one's going to be about illness and death, another one's going to have religious overtones. Other than that, though, it's a pretty organic process – we're just bouncing ideas off each other. There might still be artists working in the space once it's open to the public."

Most curators would have a panic attack at the thought of not having an exhibition completely installed in time for opening night, but the sight of artists working away in the gallery while members of the public stroll around will only add to the sense of the show as a constantly evolving work-in-progress. And Rough Cut Nation will already be more interactive than your average NGS summer blockbuster, thanks to its live music strand. Street art has always been closely bound up with music – hip-hop in particular – and in a nod to these links, Cumming and his team will be hosting spin-off music events on Friday and Saturday nights throughout August in the Portrait Gallery's Main Hall. An impressive array of musicians have signed up to take part, including Zoey Van Goey and St Jude's Infirmary, even though there's no money on offer.

"The budget we're running on for this is mostly goodwill – it's tiny," says Cumming.

"The artists aren't really getting paid anything either – we're just covering their costs – but then this is a once in a lifetime shot to do something in here. This gallery isn't going to be redeveloped again for a long, long time."

• Rough Cut Nation is at the Scottish National Portrait Gallery, Edinburgh, until 30 August (except Mondays). For music events, visit www.nationalgalleries.org