Khan teamed with Peter Gabriel on the soundtrack to The Last Temptation of Christ in 1985, with Canadian musician Michael Brook (on the albums Mustt Mustt (1990) and Night Song (1996)), and with Pearl Jam lead singer Eddie Vedder in 1995 on two songs for the soundtrack to Dead Man Walking. He also contributed to the soundtrack of Natural Born Killers.

Peter Gabriel's Real World label later released five albums of Nusrat's traditional Qawwali, together with some of his experimental work which included the albums Mustt Mustt and Star Rise. Nusrat provided vocals for The Prayer Cycle, which was put together by Jonathan Elias, but died before the vocals could be completed. Alanis Morissette was brought in to sing with his unfinished vocals. He also performed traditional Qawwali before international audiences at several WOMAD world music festivals and the single Dam Mast Qalandar was remixed by electronic trip hop group Massive Attack in 1998.

His album Intoxicated Spirit was nominated for a Grammy award in 1997 for best traditional folk album.

Khan contributed songs to, and performed in, several Pakistani films. Shortly before his death, he recorded a song each for two Bollywood films, Aur Pyaar Ho Gaya (in which he also appeared) and Kachche Dhaage. He also sang the title song of the film, Dhadkan.

Khan contributed the song 'Gurus of Peace' to the album 'Vande Mataram', composed by A.R. Rahman, and released to celebrate the 50th anniversary of India's independence.

According to the Guinness Book of World Records, Nusrat Fateh Ali Khan holds the world record for the largest recorded output by a Qawwali artist—a total of 125 albums as of 2001.

Khan was taken ill with kidney and liver failure on August 11, 1997 in London, England while on the way to Los Angeles in order to receive a kidney transplant. He died of a sudden cardiac arrest at Cromwell Hospital, London, on Saturday, August 16, 1997, aged 48. His body was returned to Faisalabad, Pakistan and his funeral was attended by the public.