Castaneda moved to the United States in the early 1950s and became a naturalized citizen on June 21, 1957. He was educated at UCLA (B.A. 1962; Ph.D. 1973). Castaneda married Margaret Runyan in Mexico in 1960, according to Runyan's memoirs. Castaneda is listed on the birth certificate of Runyan's son C.J. Castaneda as his Father even though his biological Father was a different man. It is unclear whether Carlos and Margaret were divorced in 1960, 1973, or not at all, and his death certificate even stated he had never been married.

Starting with The Teachings of Don Juan in 1968, Castaneda wrote a series of books that describe his training in shamanism, particularly with a group whose lineage descended from the Toltecs. The books, narrated in the first person, relate his experiences under the tutelage of a Yaqui "Man of Knowledge" named don Juan Matus. His 12 books have sold more than 28 million copies in 17 languages. Critics have suggested that they are works of fiction; supporters claim the books are either true or at least valuable works of philosophy and descriptions of practices which lead one to an awareness of energies, beings and worlds which lie outside the perceptual paradigm of the vast majority of human beings on this planet.

Despite the widespread popularity of his works, some critics questioned the validity of Castaneda's books as early as 1969. In a series of articles, R. Gordon Wasson, who had made psychoactive mushrooms famous, and had originally praised Castaneda's work, questioned the accuracies of Castaneda's botanical claims.

A March 5, 1973 Time article by Sandra Burton, looking at both sides of the controversy, stated:

In 1974 his fourth book, Tales of Power, was published and chronicled the end of his apprenticeship under the tutelage of Matus. Castaneda continued to be popular with the reading public with subsequent publications that unfolded further aspects of his training with don Juan.

The authenticity of Don Juan was accepted for six years, until Richard de Mille and Daniel Noel both published their critiques of the Don Juan books in 1976. Later anthropologists specializing in Yaqui Indian culture (William Curry Holden, Jane Holden Kelley and Edward H. Spicer), who originally supported Castaneda's account as true, questioned the accuracy of Castaneda's work. Other criticisms of Castaneda's work include the total lack of Yaqui vocabulary or terms for any of his experiences, and his refusal to defend himself against the accusation that he received his PhD from UCLA through deception. Stephen C. Thomas notes that in her book With Good Heart: Yaqui Beliefs and Ceremonies in Pascua Village, Muriel Thayer Painter gives examples of Yaqui vocabulary associated with spirituality: "morea," an equivalent to the Spanish brujo; "saurino," used to describe persons with the gift of divination; and "seataka," or spiritual power, a word which is "fundamental to Yaqui thought and life." Thomas further states:

In the 1990s, Castaneda once again began appearing in public to promote Tensegrity, the modernization of a group of movements that he claimed had been passed down by 25 generations of Toltec shamans. On 16 June 1995, Cleargreen Incorporated was created. The Cleargreen statement of purpose says in part:

Since his death, Carol Tiggs, a colleague of Castaneda, and also a student of don Juan Matus, has spoken at workshops throughout the world, including at Ontario, California in 1998, Sochi, Russia in 2015 and Merida, Yucatan in 2016. Tiggs had the longest association with Castaneda and is written about in some of his books. Today, she serves as a consultant for Cleargreen.

Luis Marquez, the brother of Talia Bey, went to police in 1999 over his sister's disappearance, but was unable to convince them that it merited investigation.

In 2006, Partin's sun-bleached skeleton was discovered by a pair of hikers in Death Valley's Panamint Dunes area and was identified by DNA testing. The investigating authorities ruled Partin's death as undetermined.

David Silverman sees value in the work even while considering it fictional. In Reading Castaneda he describes the apparent deception as a critique of anthropology field work in general – a field that relies heavily on personal experience, and necessarily views other cultures through a lens. According to Silverman, not only the descriptions of peyote trips but also the fictional nature of the work are meant to place doubt on other works of anthropology.

Castaneda’s books and the man himself became a cultural phenomenon [cf. Legacy]. The story of his apprenticeship to a shaman, a kind of hero’s journey, touched a chord in the counterculture generation and resonated as a myth of adventure and self-discovery.