We estimate the fundamental system parameters (e.g. mass ratio, inclination, stellar masses) of the unusual cataclysmic variable AE Aquarii by characterizing the behaviour of the mass-donor star. Our analysis focuses on the absorption lines from the donor star, avoiding biases induced by use of the poorly understood emission lines. Using simultaneous high-speed photometry and high-resolution Ha spectroscopy, we observed weak absorption lines in AE Aquarii's spectrum. By modelling these lines we estimate the spectral type of the mass-donor star (K3-K5), its orbital and rotation velocities (K-1 similar to 138 +/- 6 km s(-1), K-2 = 157.9 +/- 0.8 km s(-1); V-rot sin i = 85-108 km s(-1)), and its contribution to the total flux of the system (69-94 per cent). From K-2 and V-rot sin i we derive the mass ratio 0.58 < q = M(2)/M(1) < 0.89, the range depending upon the spectral type and limb darkening. By using K-2, and the amplitude of the pulse arrival-time delay curve of Eracleous et al., we estimate the mass ratio of the binary system (q = 0.646 +/- 0.013). We also observe variations in the absorption-line flux deficit, and, if interpreted as ellipsoidal variations, their amplitudes suggest an inclination i=49 degrees+/-15 degrees. However, the deviations from the expected ellipsoidal variations are significant, suggesting a non-uniform distribution of absorption-line strength across the donor star (perhaps indicative of star-spot regions). Realistic probability distributions for the inclination and the stellar masses are derived using a Monte Carlo simulator assuming M(1) < 1.4 M., but with no assumptions about the mass of the donor star. We find M(1) = 0.89 +/- 0.23 M., M(2) = 0.57 +/- 0.15 M., and further constrain i to 55 degrees +/- 7 degrees. We also report the serendipitous discovery of a (previously unknown) eclipsing variable star near AE Aquarii.