The Lone Ranger and Tonto Fistfight in Heaven is Alexie's first full-length collection of prose and has been universally praised, both by reviewers and by academic critics. Reviewing the collection for Whole Earth Review, Gramyo Tokuyama describes the book as "twenty-two masterfully crafted stories of the human potential to pull oneself up from dark humiliating circumstances." Sybil S. Steinberg, of Publishers Weekly, claims "Alexie writes with simplicity and forthrightness, allowing the power in his stories to creep up slowly on the reader." Steinberg notes the inter-relatedness of the stories, and praises Alexie's ability to depict the rich complexities of modern Native-American life. Of Alexie's unblinking representation of life on the reservation, Steinberg writes, "He captures the reservation's strong sense of community and attitude of hope tinged with realism as its inhabitants determine to persevere despite the odds."

Comparing Alexie to other Native-American writers such as Louis Erdich, N. Scott Momaday, and James Welsh, all of whom have written both poetry and novels, Alan Velie writes, The Lone Ranger and Tonto Fistfight in Heaven "establishes him not only as one of the best of the Indian writers but as one of the most promising of the new generation of American writers." In an essay for The Review of Contemporary Fiction, Brian Schneider argues that it is Alexie's voice that holds the stories together as a coherent narrative. Schneider writes: "Alexie's remarkable collection deserves a wide audience because of his original narrative voice, which mixes myth-making with lyrical prose and captures the nation-within-a-nation status of American Indians and the contradictions such a status produces."