Allen played junior hockey for the Saskatoon Quakers in 1940–41, and then joined the Washington Eagles of the Eastern Amateur Hockey League for the 1941–42 season, followed by a year with the Buffalo Bisons of the American Hockey League. During the Second World War, he played on the Saskatoon Navy hockey team, and then played the 1945–46 season in the Western Canada Senior Hockey League with the Saskatoon Elks.

In 1946, Allen joined the Springfield Indians of the American Hockey League, for whom he played the next five seasons. The Indians moved to Syracuse in 1951, becoming the Warriors, and he was a steady presence in the lineup for the next two and a half seasons. In February 1954, Warriors owner Eddie Shore tried to assign Allen to the Springfield Indians of the Quebec Hockey League, but he (along with several other players) balked and he was suspended. He was sold to the Detroit Red Wings two weeks later. He played 10 games with Detroit in the 1953–54 season and appeared in the playoffs, getting his name engraved on the Stanley Cup. Allen played another 18 games for the Red Wings in 1954–55, which would be the end of his NHL playing career.

He spent most of the 1954–55 season in the Western Hockey League with the Edmonton Flyers—Detroit’s farm team, whose roster included future Hockey Hall of Fame inductees Johnny Bucyk, Norm Ullman, Glenn Hall, Al Arbour, and player-coach Bud Poile. He then played one season with the Brandon Regals before being hired by the Seattle Americans as player-head coach in 1956. He retired as a player in 1957 to become a full-time coach.

From 1956 to 1965, Allen was a head coach in the Western Hockey League with the Seattle Americans/Seattle Totems, with only one losing season in eight years. With the NHL expansion in 1967, Allen was hired as the first head coach of the Philadelphia Flyers, with his former coach and teammate Bud Poile as general manager. In their inaugural season, the Flyers finished first in their division with the best record among the six new teams. They fell to third place in their division in the 1968–69 NHL season, and Allen then became the Flyers’ general manager. There, he would help construct the famed “Broad Street Bullies” that led the Flyers to consecutive Stanley Cups in 1974 and 1975, earning the nickname “Keith the Thief”. He would also help start the AHL’s Maine Mariners, one of the most successful franchises in that league’s history.  Allen was elected to the Hockey Hall of Fame as a Builder in 1992. He was the executive vice president of the Flyers.

Keith Allen was married to Joyce Webster for 65 years. Together they have a daughter, Traci, and two sons, Brad and Blake. Relocating from Seattle in the 1960s, him and his wife Joyce settled in Bryn Mawr, Pennsylvania.  Due to developing dementia in his later years, Allen lived in the care of an assisted living community, along with wife Joyce, in Newtown Square, Pennsylvania. He died on Tuesday, February 4, 2014. He was 90 years old.