Alfred John Stephen was born at Basseterre on 20 August 1802 and educated at Charterhouse, London, and Honiton School, Devonshire. In 1818 he entered Lincoln's Inn and read law in the chambers of his cousin Serjeant Stephen. He was called to the Bar on 20 November 1823, married Virginia Consett in 1824, and left England for Australia.

His ship, the Cumberland, stopped at Hobart where Alfred Stephen, deciding to stay, was admitted to the Tasmanian Bar on 4 February 1825. Later that year he became the Colony's Solicitor-General and Crown Solicitor and, by 1833, its Attorney-General. His wife died in 1837, and illness obliged him to resign in 1838. In that year he married Eleanor Martha Bedford, daughter of the senior chaplain of Tasmania.

In 1839 he accepted an invitation to be a puisne judge in New South Wales. Sworn in on 30 April he commenced a continuous judicial term of thirty-four years. He was Chief Justice from 7 October 1844 until his resignation on 6 November 1873. He was knighted in 1846, and received C.B. (1862), K.C.M.G. (1874), G.C.M.G. (1884), and a Privy Councillorship (1893). He administered the government for part of 1872 and was Lieutenant-Governor from 1875 until 1891. Ex officio a Legislative Councillor on Responsible Government he was first President of that chamber for a brief term. In 1875 he returned to the Council as an elder statesman energetically involved in matters of social and legal reform. He died in Sydney on 15 October 1894.

He is remembered as an architect of many of the State's laws and legal institutions and author of works including Supreme Court Practice and Rules of Court. His judgements were sound, albeit sometimes severe. Stephen was totally dedicated to his work and like his predecessors, he was grossly overworked, causing him to implore to his colleagues "kill no more Chief Justices. Do not allow them to be tortured, not merely by the law, but by "the law's delay".