Gustafsson is a former head coach of the Sweden men's national ice hockey team, a post he held from February 2005 to May 2010.

Gustafsson started his professional career in 1973, playing for Bofors IK in the Swedish third-tier league.

Gustafsson chose to play the 1978–79 season in his homeland Sweden, but he signed with the WHA's Edmonton Oilers in March 1979.

Gustafsson made his North American pro debut in the WHA playoffs that spring, picking up a goal and two assists in two games.

Under his guidance, Tre Kronor captured gold at the 2006 Olympic Games and the 2006 World Championships, becoming the first coach to achieve this "double".

[2] In October 2010, he took over as head coach of the ZSC Lions of the Swiss top-flight National League A (NLA) and remained in the job until the end of the 2010-11 season.

[5] In December 2012, he was named head coach of the Nürnberg Ice Tigers of the German Deutsche Eishockey Liga and replaced Jeff Tomlinson who had been sacked.

[6] In October 2013, he returned to Swiss SC Langnau for a second spell with the club, having previously spent two years with the Tigers.

[8] He was sacked in early February 2018 following a run of five wins in 15 contests and after dropping to the fourth place of the NLB standings.