Olsen was a successful player with 16 caps for the national team, earning the nickname "Drillo" from his dribbling skills and technical ability. According to close friend Nils Arne Eggen, Olsen would have been awarded with more caps as a player, had it not been for Willi Kment, Norway's manager at the time, who did not approve of Olsen's long hair and generally scruffy appearance, as well as his personal political views. Olsen was also a formidable bandy player, while playing football.
In 1995 as Norway manager Egil Olsen used one of his three votes to nominate Norwegian women's football star Hege Riise as the FIFA World Player of the Year. The first time a woman player had been nominated in what is seen as a men's football award.
In June 1999, the then 57-year-old Olsen made his appearance in English football, when he was named as manager of Wimbledon. He reportedly turned down an approach from Celtic, to take charge of the London club. Olsen has stated that his favorite player at the club was Welsh international Ben Thatcher. He remained in charge for less than a year, and was sacked just before the club slipped out of the Premiership, having been top division members since 1986. Robbie Earle said that "Olsen just didn't know how to get the best out of us". He has since returned to Norway.
On 19 May 2007, Olsen rejected an offer to manage the Iraq national football team citing a busy schedule. However, the Iraqi football president vowed not to give up on his signature and on 17 September, Olsen signed a three-year contract. In February 2008, Iraq sacked Olsen without telling him. He had tried to contact them by several means, but received the message when a new manager was installed, this action on the Iraqis part was very unexpected and their reason was said to be that they did not believe Olsen was strict enough.
In their first game under his management, they beat Germany 0–1 in a friendly away game in Düsseldorf. It is the first time Norway has won against Germany, since the 1936 Summer Olympics in Berlin.
With Olsen as manager Norway rose from rank 59 in 2009 to rank 11 in 2011 on the FIFArankings.
On 27 September 2013 Egil Olsen stand down as coach of Norway, Olsen agreed to stand down following the World Cup qualifying defeat at home to Switzerland. 
Olsen has sometimes been called a "football professor" for his scientific approach to the game, and was arguably one of the first managers to use video analysis of matches. He has collected statistical data to find out which playing styles are the most efficient. As Norway manager, he argued that as Norway didn't have the players to beat the best teams, they needed a smarter playing style than them, and one that fit Norway's skills. Ironically, his preferred style of football has historically often been called primitive.
He has found that breakaways played an important role immediately prior to many goals, and that counter-attacks after breakaways should be carried out as fast and directly as possible before the opponent can organise their defense. According to Olsen, only few goals are scored against what he calls an "established defense". As a large number of transverse passes or trying to play out an established defense with short passes and combinations increases the chance of a breakdown against, often in dangerous positions, his strategy was to make long passes against an established defense when no direct path forwards could be found. More precisely, defenders should in these cases play high, long passes towards attackers or flank players. His use of a player with good heading abilities as a target man on the flank, such as Jostein Flo, was a major break with the established idea that all flank players should be small, quick and good dribblers.
He is opposed to stationary offensive players, and argues that offensive runs (also for players that do not possess the ball) should be carried out as often as possible when one's team has the ball, as multiple simultaneous runs are very difficult to defend against. He also holds the idea that breakthrough passes to the area behind the opponent's defensive line should be sought out very often, and that frequent offensive runs towards this area is important. He also coined the phrase "å være best uten ball" (roughly "to be best at off-the-ball running", lit. "to be best without the ball") which gained some fame in Norway. It was originally said about Øyvind Leonhardsen, a player doing an exceptional number of runs during games.
Olsen is also an ardent supporter of zone defense, as opposed to man-to-man marking. He also argues that players with extreme skills (extremely fast, extremely good headers, extremely good dribblers, extremely good passers etc.), as opposed to players with only good all-round skills, are important in football.
His long-ball philosophy, use of the 4–5–1 system and his teams' often extremely successful defending earned him a bad reputation of boring football, even during the period when his results as Norway manager were astonishing. However, later in his first tenure, Norway showed signs of moving away from this philosophy–notably in their wins against Brazil in 1997 and 1998.
His thoughts, together with those of Nils Arne Eggen, have had a strong impact on Norwegian football. Norwegian club sides generally make many runs without ball, play zone defense and are very focused on fast counter-attacks. The idea of playing long balls against an established defense, however, has become increasingly unfashionable in Norway in later years.