After breaking into the first team at Thistle, Hansen was watched by top clubs, including Bob Paisley’s Liverpool. In 1975–76 season Hansen played 21 times as Thistle won the Scottish First Division championship to gain entry into the Scottish Premier Division. By the end of the following season Hansen had 35 first team appearances, before moving south of the border to Liverpool on 5 May 1977. After arriving at Anfield, the nickname which he loathed for years (“Stretch”) was forgotten and a new nickname “Jockey” was born.

Hansen cost Liverpool £100,000. He made his debut on 24 September 1977 in a league match at Anfield. Derby County were the visitors and were beaten by a single goal scored by Terry McDermott. Hansen hit his first goal the following month on 19 October during a European Cup 2nd round 1st leg tie at Anfield. He opened the scoring in the 14th minute as Liverpool demolished East German side Dynamo Dresden 5–1.

Having previously appeared for the under-23 side, Hansen made his full debut for Scotland on 19 May 1979 in a British Home Championship match against Wales in front of 20,000 spectators at Ninian Park, Cardiff. Scotland manager Jock Stein gave debuts to four Scottish players that day – George Burley, John Wark, Paul Hegarty and Hansen. Hosts Wales won the match 3–0 against a somewhat inexperienced Scottish line-up, with striker John Toshack scoring a hat-trick for Wales.

Hansen’s second Scotland cap came the following month on 2 June 1979 in a prestigious Saturday afternoon friendly match at Glasgow’s Hampden Park against reigning World Champions Argentina. On the hottest day in Glasgow for 30 years, the 61,000 sun-drenched crowd at Hampden Park saw the South Americans beat Scotland 3–1, with an 18-year-old Diego Maradona scoring his first international goal for Argentina in a virtuoso display of skill and trickery. In an interview in 2007, Hansen said that Maradona was “without a shadow of a doubt the best player I came up against. He was virtually unplayable – even at 18.”

In the 1980–81 season, Liverpool won two trophies, but did not win a third consecutive league title as Aston Villa finished as English champions. Liverpool won their first League Cup in 1981, defeating West Ham United 2–1 in a replay at Villa Park. Hansen also won his second European Cup winners medal in 1981, Liverpool defeating Real Madrid 1–0 at the Parc des Princes in Paris on 27 May.

The league title returned to Anfield in the 1981–82 season, and Liverpool also retained the League Cup in 1982 with a 3–1 win over Tottenham Hotspur, although Hansen missed this victory with injury. Liverpool did not retain the European Cup in 1982, surprisingly losing in the quarter-final to CSKA Sofia 2–1 on aggregate.

Hansen played for Scotland in the 1982 World Cup in Spain. The team failed to progress beyond the qualifying group, having drawn 2–2 with the USSR when Scotland needed a win to progress in the tournament. An accidental collision between Hansen and central defensive partner Willie Miller allowed USSR striker Ramaz Shengelia through to score the Soviets’ second goal.

In the 1982–83 season, Liverpool once again took the league title and held on to the League Cup in 1983, defeating Manchester United 2–1 after extra-time in the final at Wembley. Bob Paisley, who signed Hansen for Liverpool in 1977, retired at the end of the 1982–83 season and was replaced as manager by long-serving coach Joe Fagan.

Manager Joe Fagan retired after the Heysel disaster, and Hansen’s friend, teammate and fellow Scotsman Kenny Dalglish was appointed as player-manager. He gave Hansen the captaincy and the season ended in triumph, as in 1986 Liverpool became only the third side in the 20th century to complete a League and FA Cup “double”, following Tottenham in 1961 and Arsenal in 1971. Hansen lifted both trophies as captain and earned his first FA Cup winners’ medal, thereby completing the domestic set.

A formidable Scotland central defensive partnership was formed between Willie Miller and Alex McLeish of Aberdeen, who were managed by Alex Ferguson. Ferguson, who took charge of the national team after the sudden death of Jock Stein, dropped Hansen from the squad for the 1986 World Cup in Mexico. Hansen disagreed with the decision, as he felt that his form in the 1985–86 season (when Liverpool had won a league and cup double) was near his best. Hansen had played infrequently for Scotland before the tournament, and had often withdrawn from squads. Hansen won the last of his 26 Scotland caps in 1987.

Hansen was restricted to just six league appearances in the 1988–89 season as a result of a dislocated left knee sustained in a pre-season friendly against Atlético Madrid in Spain. Hansen played in the 1989 FA Cup final at Wembley, which Liverpool won 3–2 in extra-time against Everton, though Hansen did not lift the trophy as captain. The honour was given to teammate Ronnie Whelan who had deputised in Hansen’s absence through injury and retained the role even after the club’s first choice captain was fit again. Hansen did not have any objections to Whelan keeping the captaincy that season.

After winning the 1989 FA Cup, Liverpool were denied a second “double” in four seasons when they lost the League title to Arsenal on 26 May 1989. Michael Thomas scored a crucial last minute goal for Arsenal at Anfield that gave the North Londoners a 2–0 win. This resulted in Arsenal winning the league title on goals scored after the two teams had finished the season with the same number of points and exactly the same goal difference.

On 15 April 1989, the Hillsborough disaster claimed the lives of 94 Liverpool fans (eventually rising to 96). Hansen was selected for the FA Cup semi-final match against Nottingham Forest at Hillsborough, playing the opening six minutes of the match before it was abandoned. Hansen attended 12 funerals and visited the injured in hospital.

Hansen was unable to play in any competitive games during the 1990–91 season (when Liverpool finished second in the league and were trophyless for only the third time since Hansen’s arrival 14 years earlier) and he retired in March 1991, a month after Kenny Dalglish resigned as manager. At this stage Ronnie Moran was caretaker manager until the appointment of Graeme Souness in the permanent position shortly afterwards.

After rejecting the idea of management, when he retired from football in 1991 he planned to take three months off. After his wife pointed out that nobody had contacted them during his rest period, he started calling the networks. Sky Television employed Hansen as a pundit and summariser almost as soon as he ceased playing, and soon he had established enough of a reputation as a considered observer and thinker within the game for the BBC to approach him. He began working for BBC Radio 5 Live, before moving on to Match of the Day. Hansen was employed for 22 years as the main pundit for the BBC’s football coverage (rights to show matches or highlights permitting) and was known as a calm, authoritative, and rational analyst of the game who is particularly keen on highlighting the triumphs and “shocking”, “poor” or “diabolical” mistakes of defenders and commenting on “mediocre” performances. He became a columnist for The Daily Telegraph, Telegraph.co.uk and the BBC Sport website on football issues and has also worked as a motivational speaker.

Hansen was offered the Huddersfield Town job in 1992, following the sacking of Eoin Hand, but he turned it down. There were strong rumours that Hansen would be approached to take over as manager of Liverpool after his former captain Graeme Souness was sacked by the club in 1994. Hansen ruled himself out by stating that, despite his great affection for the club, he simply was not interested in coaching or management; a position he has maintained ever since Roy Evans got the job. Hansen also turned down an offer in 1995 to manage Manchester City, following the sacking of Brian Horton.

Commentating on the Argentina–Romania match in the 1994 FIFA World Cup, Hansen said that “the Argentine defender warrants shooting for a mistake like that”. The previous day, Colombian defender Andrés Escobar had been shot dead, a killing widely attributed to punishment for an own goal Escobar scored in Colombia’s 2–1 loss to the United States earlier in the same tournament. The BBC issued a public apology for Hansen’s poor choice of words.

In his autobiography, Hansen described the tragedy as “the blackest period of my life”. He wrote: “The number of broken hearts was incalculable. The immediate aftermath, when Kenny Dalglish and the players attended the funerals and tried to show support for the grieving families took more out of me emotionally than any other experience I have gone through.” On Match of the Day in April 2009, Hansen spoke emotionally about the tragedy. He said: “It was a horrific time, traumatic for everybody. It must never be forgotten.” In 2010, Hansen said that each of the funerals that he attended after Hillsborough got harder. “The emotional scars will be there forever,” he said.

During an appearance on Match of the Day on 21 December 2011, while discussing the prominence of racism in English football following allegations against Premier League players Luis Suárez and John Terry, Hansen caused controversy after twice using the word “coloured” in reference to black footballers. The BBC received 82 complaints by the following morning while some, including Shamrock Rovers player Rohan Ricketts, criticised Hansen’s choice of words on social network Twitter. Ricketts tweeted: “He is part of the problem when using that word. We are BLACK Alan!”. Others defended his use of words. The Daily Telegraph blogger and commentator Toby Young wrote: “In his defence, Hansen could cite the fact that America’s foremost civil rights group is the NAACP which stands for the National Association for the Advancement of Colored People. If it’s acceptable for the NAACP to use the word “coloured”, why isn’t it acceptable for him?” Hansen issued an apology the following day, saying “‘I unreservedly apologise for any offence caused – this was never my intention and I deeply regret the use of the word.”

In May 2013, it was reported that Hansen’s BBC contract was due to expire after the 2014 FIFA World Cup. On 5 September 2013, Hansen announced he would retire as a Match of the Day pundit following the 2014 World Cup. His last appearance on Match of the Day during the 2013–14 season came on 11 May 2014.