On closer scrutiny of the "special edition", commuters were even more astonished to find The New York Times's bold black headline that day read "Iraq War Ends", a pronouncement that no doubt led to much spluttering of coffee. Other articles in the august publication included a front-page apology from Condoleeza Rice for misleading Americans over Iraq's missing weapons of mass destruction, the announcement of a maximum wage for all CEOs and an article wherein George W Bush accused himself of treason for his actions during his tenure as US president.

Mike Bonanno grins as I read aloud more of that day's news. I have to chuckle, too, as I flick through the newspaper and find bylines such as Wilfred Sassoon and Elizabeth Fry, and read that all Americans are to be given free healthcare.

All that glisters is not gold, of course, and it is a falsehood to say that The New York Times reported any of the above stories last autumn. Indeed, the newspaper referred to was an elaborate hoax that circulated not only on the streets of Manhattan but Washington and Los Angeles too – 100,000 copies in all – and in doing so tickled the fancy of liberal America. Moreover, such was the quality of the fake newspaper that many people were initially fooled as they sat stunned reading the spoof blatt.

Bonanno breaks into another smile as he tells me I can keep the copy I'm reading. "Yeah, it was great fun. The New York Times' famous motto is 'All the news that's fit to print', so we played on that and changed it in our edition to 'All the news we hope to print'. Our paper was backed up by a website that equally mimicked the NYT original," he adds.

The American political activist and satirist, whose real name is Igor Vamos, is at home in a Dundee flat pouring half-cups of black coffee and explaining that the stunt took six months to complete and involved a lot of people and groups who would rather remain anonymous. "Oops, that's not very much, is it," he says in an east-coast American drawl while laughing and taking my cup to the kitchen for a top-up.

"Apologies for small coffees and apologies for the mess of this flat," Bonanno says on his return, adding that he has a hyperactive three-and-a-half-year-old daughter to blame for the lounge's strewn debris and that he prefers to be called Mike.

Dundee may seem incongruous as a base for a gonzo journalist plotting against corporate America, but here in the city of jute, jam and journalism, Bonanno could not be more content. His wife, Caz, a Scot from Edinburgh whom he met while she was an art student in New York, studied in Dundee and now works at Dundee Contemporary Arts. They've been married for nearly four years, and since to moving to the City Of Discovery Bonanno splits his time between the US and Scotland. So far, because he tends to go after the biggest targets possible, Scotland has escaped being the butt of his wit. But, in the right circumstances, who knows? He walks over to where his computer sits at a bay window and looks out to a glorious view of a shimmering River Tay and the silhouetted hills of Fife and Perthshire stretching off in the distance to flank the berry-rich Carse of Gowrie. "Yeah, Dundee gets a rough deal, but I like this city. You should see where I come from," he says.

Hailing from upstate New York, Bonanno comes in many guises: new-media guru, imposter, investigative journalist, culture-jamming artist, environmental protester, author, researcher and film-maker. He is an associate professor of media at Rensselaer Polytechnic Institute in New York, and in Dundee he has been an external examiner at the city's Duncan of Jordanstone art school.

Bonanno is also one half of an acclaimed project called the Yes Men, the latest manifestation of his creative activities. In August, a new a film called The Yes Men Fix the World will premiere in the UK. It follows his first film in 2004, The Yes Men, and a book to complement it entitled The Yes Men: The True Story of the End of the World Trade Organisation, described by author Naomi Klein at the time as "Jonathan Swift for the Jackass generation".

It was an apt description as Bonanno cites Swift as one of his major influences. "There is a rich history of satire, and I've always admired people such as Swift and Defoe, who both ended up in prison for their writings. I'm more interested in visual arts, though, and I'm inspired by 1960s counter-culture groups such as the Diggers, who protested the Vietnam War, and the Yippies, who used public pranks to bring attention to their causes. Once the Yippies held a mass gathering in Washington and tried to levitate the Pentagon. Absolutely brilliant," Bonanno says chuckling.

The above example is the type of creative theatre the Yes Men have been emulating in recent years, and the new film documents the experiences of Bonanno and his sidekick Andy Bichlbaum in their attempts to embarrass big business and governments. It is satire akin to Mark Thomas or Michael Moore, albeit verging on the preposterous, and rather than confronting power and justice the Yes Men assimilate themselves into their targets' environment and expose it.

The movie has been widely acclaimed and won the audience prize at the recent Berlin International Film Festival. Of course, chiming with the radical raison d'etre of the Yes Men, there has been much controversy, as earlier this month Bonanno and Bichlbaum, both Jewish, withdrew their film from the Jerusalem Film Festival. "It was a hard decision, and we got labelled 'self-hating Jews' for doing it, but we support the Boycott, Divestment and Sanction campaign in protest at some of Israel's policies. We feel a strong affinity with many people in Israel, sharing with them our Jewish roots as well as the trauma of the Holocaust, in which both our grandfathers died. But as film-makers and activists, we can put pressure on the Israeli government to comply with international law," he says.

Bonanno jokingly describes his home town of Troy, where he grew up, as "a much more depressed version of Dundee". His father worked as an administrator for the state's parks department while his mother was a marine-cargo insurance underwriter. He uses the word "mundane" to describe both Troy and his early family life, and says that although he was never interested in politics as a teenager, conformity was never an option. "There was never a whole lot to do, you know, so we invented fun things. We once dressed up as pirates and demanded free fish and chips from Long John Silver's, and then there was the big suitcase we used to take to the shopping mall. One of us would climb in it and be dragged through the mall making strange noises," he says.

While teenage pranks were about rebelling against uniformity, by the time Bonanno was studying visual art at Reed College in Portland, Oregon, in the early 1990s, his latent political awareness had come to the fore. There, he was part of a group called the Guerrilla Theatre of the Absurd, which pulled a number of stunts. When Vice President Dan Quayle came to town, for example, 24 members turned up outside the hall hosting the Republican convention. They split into three groups and ate mashed potatoes dyed red, white and blue, then all made themselves sick for the benefit of the press. A later project was turning the lawn of the college into a used-car lot.

Bonanno went on to form RTMark – derived from Registered Trademark – an activist collective with the aim of challenging US corporations. Its most high-profile prank was the Barbie Liberation Organization, in which the voiceboxes of talking Barbie and GI Joe toys were swapped and the toys returned to stores. "It caused quite a stir, as you had Barbie bellowing, 'Eat lead, cobra!' or 'Vengeance is mine', while Joe chirped, 'Let's plan our dream wedding'. It was about challenging the stereotype codes we put into children's minds."

In 1999, Bonanno and Bichlbaum set up a fake website at the domain gatt.org – which stands for the General Agreement on Tariffs and Trade, the predecessor to the WTO. When their satirical site was mistaken for an authentic WTO domain, they were astonished to find people inviting them to various events, an opportunity they seized upon to infiltrate corporate conferences. "We would show up essentially speaking WTO language without the spin," Bonanno says laughing.

At one conference, in Salzburg, Austria, they suggested a form of free-market democracy whereby political candidates would auction votes to the highest bidder. In Plattsburgh, New York, they proposed that the poor eat recycled 'McDung' hamburgers, which could be eaten and re-eaten up to ten times. Probably the most preposterous stunt came at a conference in Finland, when they unveiled a "golden spandex executive leisure suit" equipped with a 3ft phallus designed to monitor the activities and moods of "remote workers". However, instead of outrage from free trade representatives to such ridiculous ideas, the Yes Men found an eerie acceptance from most – even to a proposal that electric shocks should be used to increase the output of child labourers.

Their most famous hoax was played out in 2004, when they posed as spokesmen for Dow Chemicals, the US multinational company that had taken over the chemical firm Union Carbide, whose factory in the Indian city of Bhopal had leaked poisonous gas in 1984 and caused the deaths of around 10,000 people. Since the disaster, there has been an ongoing campaign for justice for the victims, and Bonanno and friends were asked by Greenpeace to help. "When Dow bought over Union Carbide in 2001, they denied any culpability, so we wanted to keep the pressure on them," Bonanno says.

To do this, they set up another fake website – called Dow Ethics – and on the 20th anniversary of the disaster they were astounded to discover that a BBC researcher had e-mailed them and asked them to appear on television on behalf of the company. "We said, 'Sure.' We could not believe our luck. We really didn't think it was for real, but a few days later there we were in the BBC's Paris studio, suited and booted and being interviewed live on TV. We announced to 250 million viewers worldwide that Dow accepted full responsibility for the gas leak and would pay compensation and clean up the abandoned factory site. The interviewer in London was lost for words. As we drove away, we thought, 'Holy shit, did that really happen?'" he says.

Their hoax caused a sensation and was the top story on news channels around the world that day, until Dow Chemicals, whose share price was in freefall, furiously complained to the broadcaster. "So then we were getting frantic calls from the BBC, which had been getting frantic calls from Dow. But Dow never got in touch with us – court action would have only prolonged their pain. We have never been sued, and I think it's because we're so absurd," he says.

The stunt received some strong criticism afterwards, however, and during another interview with the BBC Bichlbaum was repeatedly asked if they had considered the emotions of the people of Bhopal. According to the interviewer, there were many people in tears upon learning it was a hoax, but Bonanno defends the broadcast, arguing that the distress they had caused to people was minimal compared to that for which Dow was responsible.

The environment and climate change are now the main focus of Bonanno's work, and he draws a stark comparison between global warming and the Indian disaster of 1984. "The Bhopal gas leak was predicted well in advance, but people ignored the warnings in their pursuit of profit. We have the same situation with climate change. People know what's going to happen and they know what to do to avert catastrophe, but greed gets in the way.

"We need to change the economic system so profit is not our only goal. The needs of people and the planet should be foremost, not profit, and if I can alert people to this through stunts and fake newspapers, then so be it. Anyway, it's all a bit if fun."

The Yes Men Fix the World opens in London on 7 August and comes to 20 UK cities, including Aberdeen and Dundee, from 11 August.