Wallach was born in Brooklyn, New York to a Jewish family. He graduated from The University of Texas at Austin but gained his first method experience at the Neighborhood Playhouse.

Wallach made his Broadway debut in 1945 and won a Tony Award in 1951. His film debut was instantly accomplished in Elia Kazan's controversial Baby Doll and he went on to become a prolific player, although rarely in a starring role he was memorable in many of his early films, especially The Misfits, The Magnificent Seven and as Tuco (the 'Ugly') in Sergio Leone's The Good, the Bad and the Ugly. He also continued to work on the stage as well as doing made-for-TV films.

He has been married to acclaimed stage actress Anne Jackson (born 1926) since March 5, 1948, and they have three children: Peter, Katherine and Roberta.