We establish new bounds on character values and character ratios for finite groups G of Lie type, which are considerably stronger than previously known bounds, and which are best possible in many cases. These bounds have the form |χ(g)|⩽cχ(1)αg, and give rise to a variety of applications, for example to covering numbers and mixing times of random walks on such groups. In particular, we deduce that, if G is a classical group in dimension n, then, under some conditions on G and g∈G, the mixing time of the random walk on G with the conjugacy class of g as a generating set is (up to a small multiplicative constant) n/s, where s is the support of g.