In 1957 he was appointed as astronomer at the recently founded Uppsala Southern Station at Mount Stromlo Observatory in Australia where the Uppsala observatory had placed a Schmidt telescope that soon became important in the survey of the southern sky. Westerlund now began an extensive study of the stellar content of the southern region of the Milky Way and its neighbouring dwarf galaxies, the Magellanic Clouds. The results he obtained made him internationally recognized. After his years as staff member at Mount Stromlo he moved to Steward Observatory in Arizona.

In 1970 he became director of the European Southern Observatory in Chile where he played an important role in the delicate early development of the observatory. In 1975 he was called to the astronomy chair in Uppsala. Westerlund retired in 1987 but often visited his office and published no less than 60 scientific papers after his retirement, of which the last one was published in 2007.

Bengt Westerlund was the leading and often cited expert of the Magellanic Clouds.

A star cluster that was named after him, Westerlund 1, has turned out to be the richest young cluster in the Galaxy, containing many bright shining stars.

An asteroid, 2902 Westerlund, was named on the occasion of his retirement from the professorship.

In 2004 he inaugurated the Westerlund Telescope in Uppsala, named in his honour.