Coelho was born in rural Los Banos, California, and attended public schools in nearby Dos Palos. He graduated from Loyola Marymount University in 1964 and later moved to Merced, where he now lives. He worked as a staff member for Congressman Bernie Sisk from 1965 until 1978. When Sisk retired after 14 terms in Congress, Coelho ran for the seat and won. For his first four years, his district included Fresno, Merced, and Modesto. Most of Fresno was cut out of the district after the 1980 census, and Modesto is now the biggest city located in the district.

Coelho resigned from office in 1989 amidst allegations that he had received special treatment in the purchase of junk bonds. Although he was investigated, he was never charged with a crime. In a special election, State Assemblyman Gary Condit of Ceres was elected to replace Coelho.

After resigning from Congress, Coelho used his political connections to amass great personal wealth. He worked for Wertheim Schroder & Company, an investment firm, as a managing director. Coelho left Wertheim millions of dollars richer after a falling out with the company. During his time at Wertheim, and thereafter, Coelho served as a director on the board of several publicly-held companies. According to the Las Vegas Sun, Coelho spread himself so thin by serving on multiple corporate boards that the Teamsters Union cited him in a survey as America's "least valuable director." The Teamsters said, "If an investor had put a total of $100 into the seven companies on which Coelho served as a director on January 31, 1996, he would have been left with only $79.80 of that investment a year later -- reflecting a loss of more than 20 percent during a stock market boom."

In the summer of 1994, Coelho was the principal Democratic political strategist during the run-up to the mid-term Congressional elections. Officially, he was Senior Advisor to the Democratic National Committee, but Coelho acted as Chairman in all but name. After the Republican Party landslide victory in the fall congressional elections, Coelho was pilloried in The New Republic as "The Undertaker" in an article entitled "Tony Coelho and the Death of the Democrats".

In 1995, Coelho formed ETC w/tci, an education and training technology company in Washington, DC. He was the chairman and chief executive officer until 1997.

In 1998, President Bill Clinton appointed Coelho as the United States Commissioner General at the 1998 World Expo in Portugal. Then, in 1999, Coelho was made Chairman of Vice President Al Gore's presidential campaign. Coelho's star seemed to be on the rise again until a report of audit by the State Department's Inspector General released in October 1999 cited Coelho for a raft of irregularities during his tenure as Commissioner General. Next, in late March 2000, the National Journal broke the news that Coelho was under criminal investigation by the Justice Department for his activities in Portugal. Following up on the National Journal article, Time reported that a Justice Department prosecutor had told witnesses to prepare to testify before a grand jury. Calls mounted for Coelho to resign. On June 10, 2000, the Chicago Sun-Times reported that: "Well-placed figures in the Democratic Party are pressing for Secretary of Commerce William Daley to replace former Rep. Tony Coelho as Al Gore's campaign chairman." Coelho resigned on June 15th, on his 58th birthday, due, he claimed, to ill health. Shortly thereafter, the prosecutor assigned to investigate Coelho was replaced by Attorney General Janet Reno, and the new prosecutor decided against filing charges.

Coelho dropped off the media radar screen until 2004. In September of that year, he publicly criticized John Kerry's presidential campaign, particularly strategist Bob Shrum. Coelho alleged that Shrum was not working well with former Clinton associates brought in after the Republican National Convention. In response, Joe Lockhart, spokesman for the Kerry campaign and former Clinton White House press secretary, dismissed Coelho in these terms: "We get a lot of advice from a lot of quarters. We tend to take it from people who won something."