Born to a Jewish family in New York, Geffen attended the University of Texas at Austin but soon dropped out.

He began his entertainment career in the mailroom at the William Morris Agency, where he himself quickly became an agent. Soon after leaving William Morris, Geffen founded Asylum Records in 1971, which had signed artists such as Jackson Browne and Linda Rondstadt. Asylum was acquired by Warner Communications and merged with Elektra Records in 1972 to become Elektra/Asylum Records. David Geffen remained in charge until 1975, when he resigned as director and went on to found Geffen Records, or DGC in 1980. Geffen was fortunate enough to release John Lennon's last album, Double Fantasy in December of the same year, just days before Lennon's tragic murder. Geffen Records, however, is most known for releasing the works of Cher, Bob Dylan, Aerosmith, Guns N' Roses, and Nirvana. Famed group Weezer has their works on his label as well. In the 1980s, he signed Neil Young to his record label with an offer of greater artistic control. Young subsequently produced his most experimental albums, as well as his least popular and critically unsuccessful music, all allegedly to the horror of Geffen. Young eventually returned to Reprise Records.

Through the Geffen Film Company, he produced dark-tinged comedies such as (the 1986 version of) Little Shop of Horrors and Beetlejuice. Geffen was the Broadway backer for the musicals Dreamgirls and Cats. In 1994, Geffen co-founded the DreamWorks SKG studio with Steven Spielberg and Jeffrey Katzenberg.

Geffen, who is openly gay, was the subject of a persistent but false 1990s rumor that he had married actor Keanu Reeves.

Geffen is a prominent philanthropist, renowned for his support to medical research, AIDS organizations, the arts and theatre.

According to Forbes Magazine ("The 400 Richest Americans of 2004") and other sources, Geffen has pledged to give whatever money he makes from now on to charity (although he has not specified specific charities or the manner of his giving). In 2002, he announced a $200 million unrestricted endowment for UCLA Medical School.

Geffen's Malibu home on the Pacific Coast Highway has been a battlefront in an ongoing struggle between property owners and beachgoers over access to public beaches in front of private residences. In 2002, Geffen sued to block access to the public beach in front of his home. In 2005, facing a rising tide of anger, Geffen relented and allowed access through a non-profit group.