Is allusion figurative language?

Yes, allusion is considered to be figurative language. Figurative language covers a range of features like similes, metaphors, and sibilance that authors use to help their audience see or imagine what they are describing, or see things the way the author intends.

When C. S. Lewis opens A Grief Observed with the words, “No one ever told me that grief felt so like fear,” he is using a simile to help the reader understand what he has experienced. Fear, a commonly shared sensation, is used as a reference point for us to picture his situation.

The same is true for the use of allusion. In these lines from Bob Dylan’s “Shelter from the Storm,” “In a little hilltop village, they gambled for my clothes,” is an allusion to the account of Jesus’ crucifixion where the Roman soldiers gambled for his clothes as they waited for him to die.

By making this allusion to Jesus, Dylan is inviting the audience to see him as, perhaps, a suffering savior who “offered up (his) innocence, and got repaid with scorn.”

Allusion helps the author communicate depth and nuance in their descriptions. It is indeed figurative language, and a kind of shorthand that communicates more than its surface meaning.