Goodman went to Affton High School. He won an athletics scholarship to play football at Southwest Missouri State University as a teenager, but subsequently decided to become an actor, leaving Missouri for New York in 1975. He then appeared on stage off-Broadway, in dinner theatres and on TV advertisements before playing character parts in movies in the early 1980s.

Goodman is best known for comic roles, including Roseanne Barr's husband in the TV sitcom Roseanne, the voice of Sulley in Monsters, Inc., and Fred Flintstone in the movie The Flintstones. He has appeared in many roles in movies by The Coen Brothers. Goodman is frequently cast as blue-collar characters or as the main character's sidekick, for example in Sea of Love, as Al Pacino's police partner, in The Big Lebowski as Jeff "The Dude" Lebowski's best friend Walter Sobchak, and Fallen, as police partner to Denzel Washington. Standing 6 ft 2 in (1.88 m) and weighing nearly 400 lb (180 kg), Goodman had to lose weight in order to play Babe Ruth in the 1992 movie The Babe.

In 2000, Goodman had his own short-lived sitcom called Normal, Ohio, in which he played a gay man who returns to his small hometown to start a new life. Viewers did not respond well and critics panned the show. In 2004, he starred alongside Jean Smart in the CBS sitcom Center of the Universe; it, too, was critically panned and quickly cancelled.

Goodman has also been a popular guest host on NBC's Saturday Night Live. Ironically, Goodman auditioned to be a castmember in 1980, but was rejected. Goodman also had a recurring role on The West Wing, as fictional former House Speaker Glen Allen Walken, briefly becoming President when President of the United States Josiah Bartlet yielded power temporarily under the terms of the 25th Amendment to the United States Constitution. He also played someone who unexpectedly became a head of state in the film King Ralph, after the ruling family of the United Kingdom dies in a freak electrical accident.

John Goodman has a star on the St. Louis Walk of Fame and is part-owner of O'Leary's, an Irish pub restaurant in South St. Louis County.

John Goodman temporarily replaced the late John Belushi (Jake Blues) as Dan Aykroyd's partner in the latter's popular Blues Brothers Band. He first appeared as "Mighty" Mack Blues on Saturday Night Live on March 25, 1995 and went on to star in the film Blues Brothers 2000. He continued to perform alongside Aykroyd (Elwood Blues) and Jim Belushi (Zee Blues) through 2001. Soon after that, health problems forced him to shelve the character.

Goodman resides in New Orleans, Louisiana when he isn't involved in the production of a film or television series, and he participates in Mardi Gras every year.