He has illustrated several fantasy books such as the centenary edition of The Lord of the Rings, Faeries (with Brian Froud), Lavondyss by Robert Holdstock (as well as the cover of an early print of this book), 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 has also illustrated the latest addition to the Middle-earth mythology, The Children of Húrin.

Lee and John Howe were the lead concept 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. Lee has also worked as a conceptual designer on the films Legend, Erik the Viking, King Kong and The Chronicles of Narnia: The Lion, the Witch and the Wardrobe and the television miniseries Merlin. Lee recently released a portfolio of his conceptual artwork for the Lord of the Rings film trilogy, entitled The Lord of the Rings Sketchbook (above is a picture of Alan with Angelina Jolie collecting his Oscar for his work on the set of the The Ring films).