On a fitful summer day in London, an expected visitor arrives at Number 63 Lansdowne Road to be greeted by a hand-printed message taped to the door. "Welcome. Please Knock Loudly." And being on her best behaviour, the expected visitor does as she is told. She lifts the brass knocker and lets it fall several times with a heavy bang against the wood. Within a minute, the door swings open and a snowy head with a smiling face peers round the edge, "Come in, come in," says Shirley Hughes. "We don't have a bell, so I stuck that note on the door because I don't always hear callers if I'm upstairs in the workroom."

That workroom is Hughes's treasury of make-believe, a place of diaphanous light and creative clutter where the illustrations for her children's books grow from sheaves of sketches into exquisitely textured pictures so rich in detail that children are drawn into the very heart of them.

Tall and lithe, with elegant, expressive hands and her white hair wound into a French pleat, Hughes is dressed in casual linens. As she climbs the stairs to the workroom with an agility acquired from living in this very house for 53 years, it's clear that her joy and pace of work are scarcely hindered by age. Today she celebrates her 80th birthday with a solo exhibition, A Life Drawing, at the Illustration Cupboard off St James's in London, and the other day, to crown a lifetime of awards, she became the sole recipient of a specially issued Kate Greenaway medal, "the Oscar of children's book illustration", which commemorates the 70th anniversary of the inception of the prize commemorating the fabled children's illustrator who died in 1901.

Hughes was chosen from an impressive shortlist representing the best work by artists stretching over seven decades, and the book that clinched it for her was Dogger, the tale of a lost, rather ragtag, beloved soft toy which she drew and wrote 30 years ago.

"Around that time I was always being told: Shirley, your work is very good but it's so typically English, it will never sell well abroad.' But my editors at Bodley Head were gamely trying to expand into the foreign market and, strangely enough, it was Dogger that became my breakthrough to worldwide sales. Yet you couldn't get a more English type of story. It's even got a school sports day and a summer fair. And, of course, a happy ending."

But it worked, says Hughes, because everyone can relate to that heart-stopping moment when a child's best friend, his much-hugged toy, goes missing. Dogger also brought Hughes her first Greenaway medal, to be followed 27 years later by her second for Ella's Big Chance, a reworking of Cinderella for older children and set amid the glamour of the 1920s.

But long before that, Alfie arrived on the scene, a small, determined, pink-faced bundle of high energy, the hero of a thousand scrapes who, in every book, defies the march of time by remaining forever young. In the latest volume, Alfie and the Big Boys, scheduled for September, Hughes does at least allow him the prospect of schooldays.

"From his nursery next to the primary school he's eyeing up the situation, knowing that one day he'll also be a pupil. But he'll never actually get there because for me he is essentially a four-year-old character. I mean, if he'd aged he would probably have little Alfies of his own by now, nice for him but not much good to me."

Hughes is often asked if Alfie was inspired by the eldest of her three children, Ed Vulliamy, the distinguished journalist who made his name as a foreign correspondent filing frontline reports on the war atrocities in Bosnia. "No, Alfie isn't Ed, or Clara or Tom, or any of my grandchildren. He's a complete figment of my imagination but based on lots of observation."

And, for that very reason, parents and children alike regard Alfie as a bit of a totem, someone recognisable from their own family circle.

For today's audience, part of the charm of Hughes's illustrations lies in their evocation of a vanished, and maybe safer, world; one where children wore woolly jumpers, sensible lace-ups and brown T-bar sandals with crumpled socks. And the homes pictured on her pages are like homes used to be. No minimalist make-overs here, but book-lined walls and muddles of bric-a-brac crowding the mantelpiece.

Hughes's own house, in the graceful reaches of Holland Park, is like this, filled with rich reminders of a colourful family's humming hive. There are books everywhere and each room glows with figurative and landscape paintings - some by Clara, her daughter, also an illustrator, and her son-in-law, Mark Owen. There are also etchings by her husband, John Vulliamy, an architect who died last March. In retirement, he would join Hughes in daily sketching forays - she to capture people's gestures, he to pin down the line and perspective of surrounding buildings. In all these years Hughes has never felt obliged to change her drawing style. She plays to her strengths, she says, having trained in the tradition of such master artists as E H Shepard and Edward Ardizzone. The youngest of three daughters, she grew up in West Kirby in Liverpool where her father, founder of the city's leading department store, T J Hughes, died when she was five.

"Today a lot of work in children's books is very zappy, flat-surface design which can be tremendously exciting and is often influenced by television graphics. But I'm pre-television and learned from observing the work of marvellous draughtsmen men like Ardizzone, who was a genius with a dip and scratch pen, the classic technique for black-and-white drawings."

Hughes left school at 16. "As fast as I could, really. Not that I was unhappy there. It simply didn't interest me. And in those days a young girl's main endeavour was to go to the tennis club and meet a nice young man with good prospects, and get that engagement ring on her finger." In between such hopeful rendezvous she studied costume design at Liverpool School of Art. "But since the engagement ring didn't come about, I thought I'd spread my wings." Hughes set her sights on Oxford and entered the raffish milieu of the Ruskin School of Fine Art and Drawing.

By the time she and John married, he was a practising architect and she a struggling freelance illustrator. "But I don't think I would have become an artist if I hadn't grown up during the Second World War. You see, other than being frightened by the Blitz, there was absolutely no excitement, so we would mooch around in our own imagination. As a child I used to make my own magazines, and there were, of course, the movies - the only glamorous thing in a dreary life."

But childhood for three and four-year-olds is no sweet idyll either, says Hughes. "It's the stuff of high drama: getting your boots on the correct feet, doing up your coat buttons the right way and going to a party and not having your security blanket with you all the time. This is really pretty dramatic stuff."

It's "the stuff", too, that Hughes portrays with wonderful empathy, catching the body language of small children exactly. "I never work from photographs because what you want to express is people in motion, and that means drawing from life. You can always tell a drawing done from a photograph because it has a dead quality. It's just too static."

Through all these decades, nothing has shaken Hughes's belief that children are the most marvellous public an artist can encounter. "They're trusting, very optimistic and enthusiastic and they don't fake their reactions." But invariably when she talks to an audience of children there will be one who doesn't want to remove his coat, perhaps because he's cautious about exposing himself to art and literature. "And that's quite understandable. So, he'll sit, looking out of the window, apparently not listening at all. Then at the end he'll come up and ask a rather sharp question, and you realise he's taken everything in."

Hughes worries that today we are bombarded by fast-moving, electronic images almost from the time we hit the cradle. "Children's responses are being hotted up to lightning speed in a manner that I find quite alarming." Part of her job, she says, is to slow them down. "That way they can make their own personal, leisurely exploration of a still image, and discover the joy of looking for looking's sake."

In taking themselves into the picture, children find their own imagination creates another story. And that is Hughes's greatest gift to the 11.5 million far-flung people who have bought her books so far. But on this fitful summer day, she still has work to do.

So, the visitor to Number 63 must leave quietly. Happy, though, in the knowledge that Shirley Hughes, on her birthday and every day, will always look at the world and draw it with a loving and enchanted eye.

Shirley Hughes: the CV
West Kirby, Liverpool, July 16, 1927.
Education: Liverpool School of Art; Ruskin School of Fine Art and Drawing, Oxford.
Family: Married John Vulliamy, architect. Three children, Ed, Clara and Tom.
Career: Best-known for the Lucy and Tom books, and the Alfie and Annie Rose series. Has just completed illustrations for a new edition of Peter Pan and is working on a story about a flying donkey called Jonadab.
Distinctions: Won the Kate Greenaway medal three times; received an OBE in 1999.

The exhibition A Life Drawing: Shirley Hughes at 80 is at the Illustration Cupboard, 22 Bury St, St James's, London until July 27.