A Quaker, Eddington began acting with Entertainments National Service Association (ENSA) which was set up to entertain British troops during World War II, but was asked to leave when it became known that he was a pacifist and a conscientious objector. Eddington moved into repertory theatre in Sheffield, and made his first appearance in TV drama in the 1950s, as a regular cast member of The Adventures of Robin Hood (first shown 1955), initially as minor characters and eventually as Will Scarlett. He also had a role in an early episode of The Prisoner.

Although he worked as an actor all of his life, Eddington was in his forties before he became a household name. He rose to prominence through The Good Life, first screened by the BBC in 1975, and still being repeated in 2006. It tells the story of a suburban couple who decide to give up work and become self-sufficient. Eddington was cast in a supporting role as neighbour Jerry Leadbetter, with Penelope Keith as his wife, Margo. Originally intended as mere bit parts, the Leadbetters quickly became essential to each episode and their roles expanded until they had equal standing with the two "stars".

Eddington's fame grew further as the star of the hit comedy series Yes, Minister, first screened in 1980, and later to become Yes, Prime Minister - said to have been Prime Minister Margaret Thatcher's favourite TV programme. He played the role of Jim Hacker until the show ended in 1988.

While filming for Yes, Prime Minister, Eddington was diagnosed with T-cell lymphoma, a type of haematological cancer that affects the skin, but he continued performing on stage and television, and for years he kept his illness a secret from all but his friends and co-stars. His last roles were in The Camomile Lawn, a 1992 TV dramatisation of Mary Wesley's novel, and as the voice of Badger in The Adventures of Mole (1995).

He was awarded the Commander of the order of the British Empire (CBE) in 1987 and in 1992, he won the London Critics Circle Theatre Award for Best Actor, for his performance in No Man's Land.

Shortly before his death in 1995, Eddington made a moving appearance on the television series Face to Face, discussing his life, career and disease with Jeremy Isaacs. Also, his autobiography, So Far, So Good (ISBN 0340638370), was published by Hodder & Stoughton in 1995. Paul Eddington died from cancer later that year and was survived by his wife, Patricia Scott, and their four children. BBC1 aired a half-hour tribute to him on 15 July 2001 called Paul Eddington: A Life Well Lived.