He has illustrated several fantasy books such as the centenary edition of The Lord of the Rings, Faeries (with Brian Froud), The Mabinogion, Castles and Merlin Dreams. He won the Kate Greenaway Medal for illustration in 1993 for Black Ships before Troy and the Best Artist Award at the World Fantasy Awards of 1998.
Lee and John Howe were the lead artists of Peter Jackson's The Lord of the Rings movies. He illustrated many of the scenarios for the movies, including objects and weapons for the actors. In 2004 he won an Academy Award for Best Art Direction for his work on the third film in the trilogy, The Return of the King. He also made two cameo appears in both The Fellowship of the Ring and The Two Towers. Lee has also worked as a conceptual designer on the films Legend, Erik the Viking and King Kong and the television miniseries Merlin.
Alan Lee played one of the nine Kings of Men (who eventually became the Nazgûl) in the Prologue of The Fellowship of the Ring, a Man of Rohan in The Two Towers, and a Lake-town musician in The Hobbit: The Desolation of Smaug, but all three roles were uncredited.