He briefly attended the University of Alberta where he had applied for both mathematics and music. Having been rejected by the music program, Cheriton went on to study mathematics and received his bachelor's degree from the University of British Columbia in 1973.

Cheriton received his Masters and PhD degrees in computer science from the University of Waterloo in 1974 and 1978, respectively. He spent three years as an Assistant Professor at his alma mater, the University of British Columbia, before moving to Stanford in 1981.

In 1980, Cheriton married Iris Fraser; they divorced in 1994; they have four children.

Cheriton co-founded Granite Systems with Andy Bechtolsheim, a company developing gigabit Ethernet products; Granite was acquired by Cisco Systems in 1996.

In August 1998, Stanford students Sergey Brin and Larry Page met Bechtolsheim on Cheriton's front porch. At the meeting, Bechtolsheim wrote the first cheque to fund their company, Google, and Cheriton joined him with a $200,000 investment.

In 2001 Cheriton and Bechtolsheim founded another start-up company, Palo Alto based Kealia. Kealia designed a high-capacity streaming video server; Galaxy, a range of servers based on AMD's Opteron microprocessor; and Thumper, an enterprise-grade network attached storage system. Kealia was bought by Sun Microsystems in 2004, with Thumper becoming the Sun Fire X4500.

Cheriton founded and led the Distributed Systems Group at Stanford University, which developed the V operating system. He has published profusely in the areas of Distributed Systems and Networking and has won the prestigious SIGCOMM award in 2003, in recognition for his lifetime contribution to the field of communication networks. Cheriton was the mentor and advisor of students such as: Sergey Brin and Larry Page (founders of Google), Kenneth Duda (founder of Arista Networks), Hugh Holbrook (VP Software Engineering at Arista Networks), Sandeep Singhal (was GM at Microsoft, now at Google), and Kieran Harty (CTO and founder of Tintri).

In 2004, Cheriton co-founded (again with Bechtolsheim) and was chief scientist of Arista Networks, an industry leader in Data Center Networking, where he worked on the foundations of the Arista Extensible Operating System (EOS). Arista had a successful public offering in 2014.

On November 18, 2005, the University of Waterloo announced that Cheriton had donated $25 million to support graduate studies and research in its School of Computer Science. In recognition of his contribution, the school was renamed the David R. Cheriton School of Computer Science. In 2009, Cheriton donated $2 million to the University of British Columbia, which will go to fund the Carl Wieman Science Education Initiative (CWSEI). Cheriton more recently donated $7.5M to fund a new chair in computing, as well as a new course on computational thinking.

Cheriton is an investor in and advisory board member for frontline data warehouse company Aster Data Systems, which was acquired by Teradata in 2011 for $263M.

In 2014, Cheriton co-founded and invested in Apstra, Inc CEO Mansour Karam and CTO Aleksandar "Sasha" Ratkovic. In 2015, Cheriton co-founded and invested in BrainofT Inc (Caspar) CEO Ashutosh Saxena.

As of 2016, Cheriton is working with Stanford students on transactional memory, making memory systems that are resilient to failures. "In-memory processing leads to dramatically faster computers — in some cases speeding up applications by a factor of 100,000. It changes the complete nature of how a Business can run. We’re trying to lower the cost and to fit these systems in existing memory structures and reduce the number of components to make them more reliable and more secure," said Cheriton in a 2016 interview.

Cheriton was ranked by Forbes with an estimated net worth of US$ 6 billion (as of February 18, 2018). Cheriton has made generous contributions to education, with a $25 Million donation to support graduate studies and research in the School of Computer Science (subsequently named after him) at the University of Waterloo, a $7.5 million donation to the University of British Columbia, and a $12 million endowment in 2016 to Stanford University to support Computer Science faculty, graduate fellowships, and undergraduate scholarships.