Ursula Le Guin finds inspiration for her powerfully imagined fantasy worlds in landscape as much as literature. Her home in the west hills of Portland, above Oregon's Willamette river, has a spectacular view of Mount St Helens, which blew its top 25 years ago, but is now eerily tranquil. In this gabled house in the Pacific north-west, her home for almost half a century, Le Guin conceived the parallel series that won her recognition as a Grand Master of both fantasy and science fiction. Thirty years before Harry Potter, in A Wizard of Earthsea (1968), she sent Ged, also called Sparrowhawk, to a school for wizards in a pre-industrial archipelago of dragons and sorcerers governed by magic, death and the power of language. Le Guin, who also writes realist fiction, poetry, essays and books for young children, says: "I'm impatient with genre as a label of quality. But if we could stop critics being ignorant, genre would be interesting."

Her credit to JK Rowling for giving the "whole fantasy field a boost" is tinged with regret. "I didn't feel she ripped me off, as some people did," she says quietly, "though she could have been more gracious about her predecessors. My incredulity was at the critics who found the first book wonderfully original. She has many virtues, but originality isn't one of them. That hurt." Savoured by adults and children, the Earthsea quartet, including The Tombs of Atuan (1971), The Farthest Shore (1973) and Tehanu (1990), has never been out of print, and was augmented in 2001 by Tales from Earthsea and the novel The Other Wind.

The Left Hand of Darkness (1969) was a founding classic of her Ekumen cycle of adult science fiction, premised on "Mobiles", or explorers, from the planet Hain. The novel won both the Nebula and Hugo awards, as did her tale of flawed utopias, The Dispossessed (1974). In The Lathe of Heaven (1971), her sci-fi classic set in a dystopic Portland, a man with the gift to make his dreams reality is catastrophically manipulated by a utopian psychiatrist.

For Margaret Atwood, Le Guin is a "quintessentially American writer", of undoubted literary quality, "for whom the quest for the Peaceable Kingdom is ongoing". Her worlds, Le Guin says, are not so much invented as discovered. "I stare and see something, maybe a person in a landscape, and have to find out what it is." But whether charting inner lands or outer space, her eye remains on the here and now. At 76, Le Guin counts among her affiliations the peace and women's movements ("I take a perverse pleasure in calling myself a feminist"), and Taoism ("profoundly subversive").

Her 20th novel, Gifts, now out in Orion paperback, begins a new series for young adults, "The Annals of the Western Shore". The second book, Voices, will be published in March. "Writing fantasy isn't writing for children, but it erases the distinctions; it's inherently a crossover genre," she says. Much of fantasy writing, she adds, is "about power - just look at Tolkien. It's a means to examine what it does to the person who has it, and to others." A believer, with Shelley, that "the great instrument of moral good is the imagination", she says: "If you cannot or will not imagine the results of your actions, there's no way you can act morally or responsibly. Little kids can't do it; babies are morally monsters - completely greedy. Their imagination has to be trained into foresight and empathy." No easy task. As she once wrote in exasperation, "Sure, it's simple, writing for kids. Just as simple as bringing them up."

Gifts, like some of her earlier books, is about a slave-owning society obsessed with purity of lineage. "There are so many cultures that do that - especially when they think something special runs in the blood," she says. "Some reviewers say, 'slavery's dead'. What planet are they living on?"

Le Guin was born in 1929 in Berkeley, California, where her father, Alfred Kroeber, a German immigrant, founded the university anthropology department, studying the "wrecks of cultures, the ruins of languages, smashed by a monoculture". Her mother, Theodora, shared his fascination with native American life, and wrote Ishi in Two Worlds (1961), on a Yahi Indian's encounter with "civilisation". "We had a house full of folktales; I liked the Norse better than the Greek," says Le Guin, who sees the frontier between civilised and barbaric as "boundaries of the mind alone".

During summers on the family ranch in the Napa Valley, native American "uncles" made her aware of both the richness of their oral culture, and the bigotry they faced. They and the valley inspired Always Coming Home (1985), about post-nuclear holocaust Californians. "White is not the norm for me, or equivalent to being human, as in so much of the fantasy I read," she says. "I made a conscious choice to make most of my characters people of colour." In the Earthsea books, Ged is a dark copper-red, and his friend Vetch is black. "I've had endless battles with cover departments. Gradually the people on the books are darkening - it's taken that long." The early Earthsea books were loosely adapted as a TV miniseries for the US sci-fi channel last year, but it was "roundly booed and deserves to die a quiet death", she says. "Everybody was white except for one black man. It was a travesty." Her own earlier screenplay has languished ("they said it was the wrong moment for fantasy in Hollywood").

After studying French and Italian literature at Radcliffe College and Columbia University, she won a Fulbright scholarship to France. She met Charles Le Guin, a fellow scholar from Georgia, "in steerage" on the Queen Mary. "We married in Paris in 1953, then moved to the Deep South. Going to a totally segregated society was quite a shock. I pulled him west." A historian, he took up a post at Portland State University in 1958. The couple have three children and three grandchildren.

Initially a poet, Le Guin published her first novel at 37. From JRR Tolkien, "I learned the trick of hinting at a whole background with a few names, so you'd feel situated in a real world, not a fantasy bubble." But, "raised as irreligious as a jackrabbit", she found much of CS Lewis "simply Christian apologia, full of hatred and contempt for people who didn't agree. The division into good and evil was different from Tolkien, where evil beings are only a metaphor for the evil in our lives; he never casts people into the outer darkness as Lewis enjoyed doing." Though fantasy is often miscast as escapist, for Le Guin, it is the natural language of the "spiritual journey and the struggles of good and evil in the soul". It begins to resemble dream, she says, "and the symbols seem to be near universal and accessible to all. They're the same through the ages: we read the Epic of Gilgamesh and get it. The symbolic language is basic but not primitive or childish; it's a deep grammar of understanding." Jung was a useful stepping stone ("unlike Freud, he understood what artists do").

She traces a fantasy lineage, from Frankenstein to Philip K Dick, embracing Jorge Luis Borges, Italo Calvino, Jose Saramago and Gabriel García Márquez. But she also aspired to other traditions, from Dickens and Tolstoy, to Hardy and Woolf: "You have to shoot as high as you can shoot." She had abandoned "hardware and soldiers" sci-fi in her teens. "It all had conservative assumptions: white men go forth and conquer the universe," she says. "As an anthropologist's daughter, you look more from the point of view of the conquered." But in the 60s she became part of a generation "not interested in space conquest or wiring, but using the form as a wonderful box of fixed metaphors you can play with endlessly, like a musician with a sonata."

Her alternative planets, from which emissaries report back like space-age anthropologists, are "thought experiments" to probe the present, not prediction or extrapolation into the future. The novels sift the essential in human nature from the mutable. Change is the "key word: you're opening the door to imagination, and the possibility of things being other than they are". She has an abiding interest in "peculiar arrangements" of gender and sexuality. "It's a tremendous playground, and it doesn't do any harm to have people's ideas shook up," she says. "I do my thinking narratively."

The germ of The Left Hand of Darkness was a society that had never known war. But the inhabitants are androgynous ("the king was pregnant"). "I eliminated gender to find out what was left," she later wrote. Some feminists carped at her use of the pronoun "he" of her androgyns. But the writer Sarah LeFanu sees the questioning of masculinity and femininity as prescient: "She was asking how we live now, and how we might live. She writes wonderfully about what it means to be human."

Girls were barred from the Earthsea school for wizards. "While in science fiction I was destroying gender, my imagination in fantasy was more traditional." She found herself "reborn slowly, over 15 years; I evolved with second-stage feminism". In Tehanu, a darker novel that challenges the earlier books, she returned to Earthsea after a 17-year gap, writing from the view of a mature woman and an abused girl. In the latest of her Ekumen novels, The Telling (2000), an emissary from a post-funda-mentalist Earth arrives on Aka, where the written word is banned. Christian and Islamic fundamentalism fed into the novel, but the impetus was Mao's suppression of Taoism. "He wiped out an ancient religious practice in a generation," she says. "Culture and knowledge are so vulnerable; that shocked me."

Le Guin, whose fantasies are partly about the artist as magician, learning to temper power with responsibility and talent with humility, says she wrestles with the temptation to moralise. "Sometimes one's very angry and preaches, but I know that to clinch a point is to close it," she says. "To leave the reader free to decide what your work means, that's the real art; it makes the work inexhaustible."