Illien grew up in Switzerland, a country in which motor racing had been banned since 1955 — when he was just six years old — following the Le Mans disaster. Despite this prohibition on domestic racing, he developed a keen interest in motorsport during the 1960s largely by following the career of Jo Bonnier, a Swedish expatriate driver who lived in Switzerland.
Illien trained initially as a technical draughtsman. He later returned to formal education and earned a degree in mechanical engineering from Biel University's School of Engineering, graduating in 1976.
Illien's first motorsport role came in 1971, when he assisted his idol Bonnier in preparing an old customer McLaren chassis. When Bonnier was killed at Le Mans in 1972, driving a Lola T280, Illien was hired by Fred Stalder to modify a four-cylinder Chrysler-Simca engine for a Le Mans prototype entered by Stalder's Racing Organisation Course team. That engine was later adapted for Formula 2 use in the mid-1970s.
After graduating from Biel, Illien's career temporarily moved away from motorsport into military engineering. He joined Mowag in Kreuzlingen — a company later acquired by General Dynamics — where he designed diesel engines for armoured vehicles. In 1979, at the age of thirty, he gave up the position and moved to the United Kingdom to join Cosworth Engineering in Northampton, spending five years there contributing to the design and development of the company's racing engines, including the DFY V8. It was at Cosworth that Illien met Paul Morgan.
In 1983, while working at Cosworth on the DFX engine for the IndyCar World Series, Illien and Morgan identified an opportunity to build a more competitive American racing engine. They initiated their project in 1984 and approached Roger Penske for assistance. Penske secured financial backing from General Motors, and the four parties each took a twenty-five percent stake in a new company called Ilmor Engineering. Morgan oversaw manufacturing and commercial operations while Illien was responsible for all design work. By 1986, Ilmor was competing in IndyCars.
In 1989 the decision was made to enter Formula 1. Ilmor developed a 3.5-litre V10 engine and supplied it to Leyton House in 1991 and Tyrrell in 1992. By 1993 Ilmor had entered a partnership with Mercedes-Benz, supplying the Sauber team in its debut Formula One season. When Mercedes extended this alliance to McLaren from 1995, the combination delivered Ilmor its first Grand Prix win in 1997 and subsequently the kind of championship-winning success that matched what the company had already achieved in the United States.
Shortly after Paul Morgan's death in 2001, Mercedes increased its managerial involvement in Ilmor, purchased a fifty-five percent share, and renamed the company Mercedes-Ilmor. When Mercedes' parent company DaimlerChrysler purchased the remaining share in 2005, Illien and Penske retained a Special Projects division. This division assisted Oldsmobile and Chevrolet in developing IRL engines from 1997 to 2003, then Honda from 2003 to 2011. Illien also took the company into MotoGP with the X3 project.
In early 2015, Illien was engaged by Red Bull Racing and Renault to assist in improving their Formula One power unit, which had fallen significantly behind competitors in the hybrid era.