People would see me and think, I don't want him in my movie!: Ian McKellen

Thanks to his roles in the Hobbit and X-Men films, Sir Ian McKellen is now one of Hollywood's most bankable stars. And it's all because he said no to Tom Cruise, he tells Adam Higginbotham In the early months of 2011, more than a decade after he first began work in the Lord of the Rings trilogy, Sir Ian McKellen returned to New Zealand to play the wizard Gandalf the Grey once again.

He'd had his reservations about reprising his role: legal entanglements and union actions had delayed the production for years, and McKellen, at 71, was far from certain that he wanted to be tied up in filming halfway around the world from his home in London.

And this time, in the first of director Peter Jackson's two projected prequels based on Tolkien's The Hobbit, the part would be more technically demanding. Gandalf would spend most of his time surrounded by diminutive characters - hobbits and dwarves half his height - but as they were played by actors of ordinary proportions, the filmmaker would have to employ an arsenal of special effects to make their world seem convincing.

Some were surprisingly simple: in long shots, Gandalf could stand close to the camera and a hobbit farther away, using forced perspective to make one seem larger than the other. But in close-ups things became more difficult. So, to film an inaugural dinner party in Bilbo Baggins's underground home, McKellen found himself sitting alone in a scaled-down set representing Bilbo's "hobbit hole", as 13 actors playing hobbits sat in a full-sized version of the same set on the other side of the studio.

They would all play the same scene simultaneously to a pair of cameras, and the shots could be overlaid in post-production. But McKellen could neither see nor hear the other actors, instead having their dialogue read to him through an earpiece, and faced a phalanx of photographs on stands that lit up when each character spoke, to help guide his reactions to their lines.

To further complicate matters, the pictures he had to respond to were not of the characters in make-up, covered with layers of prosthetics, but of the actors beneath, none of whom he had ever met before. "This is my first day of shooting," he tells me. "I don't know who they are. I can't hear what's being said. I don't know who's speaking to me. I don't know what they're looking at. I'm acting in a vacuum." By the end of the day - alone with his earpiece, his miniaturised cutlery and his faces on sticks, watched only by a robot camera - McKellen grew tearful with frustration.

"This", he muttered to himself, "isn't why I became an actor". That night, he offered to quit. In spite of his various honours - a CBE in 1979, the knighthood in 1992 - McKellen remains famously informal. When I arrive at the sprawling penthouse apartment where he's staying in Manhattan, while appearing in Waiting for Godot and Harold Pinter's No Man's Land with his friend Patrick Stewart, his assistant is surprised. "Oh, s---," he observes.

"He's asleep!" It's noon on a Monday, and -McKellen's day off. Last night, he hosted a party here for 100 guests that didn't finish until 5am; the interview has been forgotten. An hour later, a freshly showered McKellen is still waking up.

The living room of the apartment has been set with vases of fresh flowers; on the mantlepiece is the certificate registering McKellen as a minister in the Unification Church, something Patrick Stewart's new wife, Sunny, organised, so that he could officiate at their wedding, in September. McKellen has no confidence that his online ordination has any legitimacy. "We may find out that Patrick and Sunny are not really married at all, and it will all be my fault," he muses.

"Hmm." As he waits for his breakfast to appear, McKellen's distinctively theatrical delivery is even more stately than usual. He eats an apple, rubs at his face and digs in his ear with one arm of his spectacles. "Monday is my Sunday. I'd just got it into my mind that I didn't have anything on today," he says.

"Anyway. Well. We'll be talking about The Hobbit, will we?" After his inauspicious start more than two years ago, McKellen not only continued his role as Gandalf - Jackson found other ways of making him seem larger than his fellow cast members - but saw it expanded.

At the end of nine months' back-to-back filming for the planned pair of Hobbit movies in New Zealand, the director announced that he was so pleased with the material he had shot that he would turn it into a trilogy. The first instalment, An Unexpected Journey, released last Christmas, has already outdone even the success of the Lord of the Rings trilogy, becoming one of the highest-grossing films of all time, with global box office takings of a little more than $1billion.

This - along with his appearance in three X-Men films, playing the villain Magneto - has helped turn McKellen, regarded as possibly the greatest classical actor of his generation but wholly ignored by Hollywood until he was in his fifties, into one of the most bankable film stars in the world. And yet he says his life remains, in most important aspects, unchanged.

"We could go out now and nobody would turn a hair… or they might," he says. "Depends on chance. But I go on the subways; I go on the tube. It's not that once I was in these films I suddenly became overwhelmed with offers to be in other films, or do the sort of work that I wasn't previously doing - not at all. Since I did Lord of the Rings, I've been on Broadway with Helen Mirren, I've played King Lear for no money for the Royal Shakespeare Company.

I've also been in these films, which have brought me retrospective fame, of a sort. But nothing like, thank goodness, the fame that Tom Hanks has got, or Johnny Depp, or whatever. It's not an impediment." Indeed, McKellen says that the roles that have made him globally recognisable have also helped him keep the public at arm's length.

"Because Gandalf and Magneto are rather imposing characters, people don't take advantage of you. They're a little bit in awe, in a way that they wouldn't be if they saw a friendly face from Coronation Street. People on television have trouble with fame, because audiences think they're their mates." Yet McKellen apparently does an excellent job of being famous.

He's maintained a voluminous personal website (which he says he writes for in place of producing an autobiography) since long before the invention of social media, and has a game and sometimes self-deprecating public persona - swigging advocaat on Channel 4's Chatty Man or baking brownies with Martha Stewart - that seems particularly winning in a knight of his generation.

During a break in rehearsals for Godot in Melbourne a few years ago, a passer-by thought he was a tramp and gave him a dollar for his trouble; he doesn't even mind when he's mistaken for the wizard from the Harry Potter movies.

"The other day there were 100 people outside the theatre who wanted autographs," he says. "Just as I did the last one, a woman grasped my hand and said, 'It's so wonderful to meet Dumbledore in person.' I blew her a kiss and got into my car." (McKellen is acutely aware of the perils of mixing up actors who have appeared in similar roles.

On being introduced to Jack Klugman, who played Felix in the television version of The Odd Couple, McKellen took him for Walter Matthau, who portrayed the character in the movie, with more distinction. "You're my favourite actor," McKellen told Klugman, before realising his mistake.

"Whenever Jack came through London thereafter, he would send me a postcard, saying, 'Hi! Your favourite actor's in town!'?") Despite having learnt his craft in repertory theatre and built his reputation on playing Shakespeare - one critic described his 1969 performance of Richard II as being touched by "the ineffable presence of God"; by the time he toured the United States with the RSC production of King Lear in 2007, tickets were reportedly changing hands on eBay for $3,500 each - McKellen often used to say that what he really wanted to be was a film star.

After many of his contemporaries - Albert Finney, Tom Courtenay, Peter O'Toole - had made the transition from stage to screen in the early Sixties, McKellen still worked almost exclusively in the theatre. He felt passed over. "Friends tell me, 'You were always going on about, Why am I not in films??'?" he says.

 "Well, looking back, I know why now. It's because my acting was so inappropriate for films. My professional pride was in being able to deliver a performance that would impact on people sitting in the gods as much as to people sitting in the front row - which would often alarm the people in the front row, particularly critics, who thought I was overacting. I wasn't overacting to the people over there.

But people would come to see it and think, we don't want this guy in our movies." McKellen's approach began to change in 1976, when he appeared opposite Judi Dench in Trevor Nunn's claustrophobic production of Macbeth, in front of an audience of only 100 people, at the Little Theatre in Stratford. "The projection of the performance in voice and face was at a human, everyday level," he says.

"I got intrigued by working in small theatres." The first film in which McKellen played the lead, the 1981 D?H Lawrence biopic Priest of Love, sank without trace, but he began taking small roles in big movies just to see how the process worked. "I went about deliberately accepting jobs that didn't really interest me. Other people's films, where I didn't have a big responsibility as an actor and I wasn't going to ruin the project if I wasn't up to it."

These autodidactic outings included a turn as Death in the Arnold Schwarzenegger movie Last Action Hero, and as a Foreign Office worker in Plenty, opposite Meryl Streep. "As with other wonderful performers, you can't really see how it's done," he says of Streep.

"You say to yourself, well, I am in the presence of someone who can do this better than anyone else in the world. And don't get too depressed if you can't match her." McKellen has often said that it wasn't until he finally came out, in 1988, at the age of 49, that he realised his full potential.

It was only then that he was able to convincingly convey anger, or cry, onstage. "I'd spent an awful lot of time disguising myself as an actor, not being myself," he says. "When I came out, this part of myself that I wanted to express was a whole person. My emotions were flowing freely for the first time." By the time he played the lead in his own screen adaptation of Richard III a few years later, he was a different performer entirely. "When I came to the smallest, the closest audience of all - the camera - I was ready for it in a way that I wouldn't have been 20 years or more before," he says. "That was the first film that I felt was any good."

With Richard III, McKellen finally attracted the attention of Hollywood; he was 56. Director Bryan Singer, who would later cast McKellen in the first X-Men film, gave him the part of an ageing Nazi concentration camp commander in Apt Pupil; the same year, his performance as gay film director James Whale in Gods and Monsters was nominated for an Academy Award.

Even so, when McKellen was first offered an entree to the big time, he didn't bite. Asked to be in -Mission Impossible II opposite Tom Cruise, he went to a meeting with director John Woo and Cruise's producing partner. "And they wouldn't show me a script. I was expected to say yes to being in this film, which I hadn't read. Well, you can't say that to somebody who has played Macbeth," he says.

"I live for the text. It's my job." So he said no. Eventually, they sent him - under guard - a single scene featuring his character; his agent tried to talk him into it: it would be a huge film, and a wonderful part. "And I said, 'On what evidence do you say that?' All the pressure was: It's $1?million; you're up against Tom Cruise. This is it; this is the film career that someone of your age can, at last, have."

But they still wouldn't show him a script. Anthony Hopkins took the role instead. In the end, Mission Impossible II took months longer than expected to complete. If McKellen had said yes, he'd never have been able to accept the parts he was offered next - in X-Men and The Lord of the Rings. Today, McKellen says that with that one exception, there are few film roles he's ever turned down.

"It's my impression," he says, "that I've done every job that I've been asked to do." Over his half-century of professional acting, McKellen has kept at least one prop from almost every role he has played. He has Gandalf's sword, staff and hat, and many gilt coins from the hoard of the dragon, Smaug, the centre of the latest Hobbit film.

"There were quite a lot of them," he says; he has the letter to David Copperfield from Dora, from the stage production of the story he starred in back in 1962, in Ipswich; he has a book cover and a broken piece of the green tile from the front of the Rovers Return, acquired while playing con man Mel Hutchright in 10 episodes of Coronation Street in 2005. "I can't tell you how I got that. It involves somebody else, who would get into trouble." Some of these keepsakes McKellen keeps in filing cabinets in the five-storey London house where he lives, others in scrapbooks.

"I don't quite know where they all are, or if I've still got them," he says. But the one that means the most to him is the goblet he carried as Richard II more than 40 years ago, made of papier-mache and rope, and painted gold. "That's still up on the sideboard. So as I pass that, I just think about what it was. It's a bit like having photographs around the place," he explains.

Since the end of his relationship with Nick Cuthell, a young New Zealander he met while working on The Lord of the Rings, McKellen has lived on his own. He enjoys it. "I think if I didn't, I wouldn't. I've got quite a lot of friends who live alone. So we see a lot of each other.

It's not that we're not sociable." For a while, McKellen talked about taking six months off from work every year, to travel and spend time with his friends and family. But he's since abandoned that idea; his output now seems as great as ever, and its variety borders on the absurd.

Over the past 10 years, he has appeared as both King Lear and as Widow Twankey in Aladdin; in The Simpsons and in the sitcom Vicious; before beginning work on Godot, he also played himself in Extras ("How do I act so well?" he asks Ricky Gervais. "What I do is I pretend to be the person that I am portraying in the film or play.") Is there anything he hasn't, yet, been asked to do? "A musical? Ice skating?" he suggests.

"My own chat show?" When he's finished his current run on Broadway, he'll return to London to play a 100-year-old Sherlock Holmes in the new movie A Slight Trick of the Mind. Now 74, he has dental implants, a hearing aid and has been treated for prostate cancer, but he uses everything he can in his work: "I run around in Godot. I climb over a wall. Fortunately, I have to do it as a man who - oh! - whose shoulder hurts.

And probably my shoulder does hurt, because if it didn't and it was my hip, I would go, 'Oh, the hip!' So you can use your complaints." He has no plans to retire. "'Old age is no place for sissies,'" he announces, quoting Bette Davis. He pulls himself upright in the chair where he's been slumped for the past hour; silhouetted against the window, McKellen's grey hair is a bright corona, glowing white in the afternoon sun. "What can I do to keep it at bay? You can keep active.

Some people garden, some people go walking, some people act." And he'll keep doing that as long as he can. "Acting is more important to me than ever. If I weren't doing it, then I really would be on the slippery slope… the end of which is The End. So," he says aridly, "it's a matter of life and death, a bit."