David Geffen was born in Borough Park, Brooklyn, New York, to Abraham Geffen and Batya Volovskaya (1909—1988). Geffen's mother owned a clothing store in Borough Park called Chic Corsets by Geffen. Both of his parents were Jewish immigrants who met in British-mandated Palestine and then moved to the United States. Geffen graduated from Brooklyn's New Utrecht High School in 1960 with a 66 percent average. He attended the University of Texas at Austin for a semester, and then Brooklyn College, before again dropping out. He then moved to Los Angeles, California to find his way in the entertainment Business. He attended Santa Monica College (then known as Santa Monica City College) in Santa Monica, California, but soon left. Geffen attributed his challenges in school to dyslexia.

His older brother Mitchell (born Mischa) Geffen (1933–2006) was an attorney who attended UCLA Law School and later settled in Encino, California. Mitchell Geffen fathered two daughters, who are David's closest surviving relatives.

After a brief appearance as an extra in the 1961 film The Explosive Generation, Geffen began his entertainment career in the mailroom at the william Morris Agency (WMA), where he quickly became a talent agent. In order to obtain the WMA job, he had to prove he was a college graduate. As he later reported in an interview, he claimed in his job application at WMA that he had graduated from the University of California at Los Angeles (UCLA). Because he worked in the mailroom, Geffen was able to intercept a letter from UCLA to WMA which stated that he had not graduated from UCLA. He modified the letter to show that he had attended and graduated, then submitted it to WMA.

Joni Mitchell and Geffen were close friends and, in the early 1970s, made a trip to Paris with Robbie Robertson and Robertson's wife, Dominique. As a result of that trip, Mitchell wrote "Free Man in Paris" about Geffen.

Geffen remained in charge until December 1975, when he went to work as vice chairman of Warner Bros. film studios. He then retired and in 1977 was informed (erroneously) that he had cancer. During his retirement period he spent a short time (the fall of 1978 and spring of 1979) teaching a noncredit seminar on the music industry and arts management at Yale University, where he featured classroom guests Jackson Browne and Paul Simon. In 1980 a new medical diagnosis revealed the error in the original diagnosis and Geffen was given a clean bill of health, whereupon he decided to return to working in the entertainment industry.

The November 1980 release of John Lennon's album Double Fantasy seems an impressive feat for a new label, but at the time Lennon stated that Geffen was the only one with enough confidence in him to agree to a deal without hearing the record first. Yoko Ono, Lennon's wife and partner, stated that Geffen was the only label head to pay attention to her. In December 1980, Lennon was murdered and Double Fantasy became a massive seller. Over the years Geffen Records/DGC has become well known as a label, releasing works by the likes of Olivia Newton-John, Asia with Steve Howe and John Wetton, Elton John, Cher, Sonic Youth, Aerosmith, Whitesnake, XTC, Peter Gabriel, Lone Justice, Blink-182, Guns N' Roses, Nirvana, Lifehouse, Tyketto, Pat Metheny, Sloan, the Stone Roses and Neil Young.

Geffen can be heard on Barbra Streisand's The Broadway Album, released in 1985. The track "Putting It Together" features Geffen, Sydney Pollack, and Ken Sylk portraying the voices of record company executives talking to Streisand.

Through the Geffen Film Company, Geffen produced dark-tinged comedies such as (the 1986 version of) Little Shop of Horrors, Risky Business and Beetlejuice. Geffen was the Broadway backer for the musicals Dreamgirls and Cats. In 1994, Geffen co-founded the DreamWorks SKG studio with Steven Spielberg and Jeffrey Katzenberg. In 2008, Geffen left DreamWorks.

The label was distributed by Warner Bros. Records since its inception but, in 1990, the label was sold to MCA Records. Geffen continued to run the label before leaving Geffen Records in 1995. The Geffen label is today is part of the Interscope-Geffen-A&M division of MCA's successor, Universal Music Group, formed as the result of the 1999 merger between the MCA and PolyGram families of labels.

Geffen has developed a reputation as a prominent philanthropist for his publicized support of medical research, AIDS organizations, the arts and theatre. In 1995 he donated $5 million towards UCLA's Westwood Playhouse. The theatre was renamed the Geffen Playhouse.

Geffen is the subject of several books, most recently The Operator: David Geffen Builds, Buys, and Sells the New Hollywood (2001) by Tom King, who initially had Geffen's cooperation, but later did not. An earlier biography was The Rise and Rise of David Geffen (1997) by Stephen Singular. He is also a featured character in Mailroom: Hollywood History From The Bottom Up by David Rensen, in Mansion On The Hill by Fred Goodman, in Hotel California by Barney Hoskyns, and in several books about Michael Ovitz.

Until 2017 Geffen owned a Malibu compound on Carbon Beach. In 1983 Geffen was granted permits from the California Coastal Commission to build a Cape Cod-style compound over multiple beachfront lots in exchange for creating a public pathway to the beach. He failed to build that pathway and in 2002 filed a lawsuit to block public access altogether. After a protracted three-year legal battle, Geffen reached a settlement with the Coastal Commission, granting the public a nine-foot-wide easement to the beach and reimbursing the state and non-profit groups $300,000 in legal fees. The pathway was opened on May 30, 2005 to national and international media coverage. The controversy has been called the "most famous Malibu battle" for beach access. The Coastal Commission later contacted the state transportation department without receiving a response to ask if the curb cuts that prevented public parking were valid, amid rumors that Geffen had installed four fake garage doors.

In October 2006, Geffen sold two paintings by Jasper Johns and a De Kooning from his collection for a combined sum of $143.5 million. On November 3, 2006, the New York Times reported that Geffen had sold Pollock's 1948 painting No. 5, 1948 from his collection for $140 million (£73.35 million) to Mexican financier David martinez. martinez is the founder of London-based Fintech Advisory Ltd, a financial house that specializes in buying Third World debt. The sale made No. 5, 1948 the most expensive painting ever sold (outstripping the $134 million paid in October 2006 for Gustav Klimt's portrait Portrait of Adele Bloch-Bauer I, purchased by cosmetics heir Ronald Lauder).

In 2007, Geffen bought a half-share in friend Larry Ellison's luxury yacht Rising Sun, then at 138 meters (453 ft) the sixth largest motor yacht in the world. After Ellison ordered a new and more compact 91 metres (299 ft) yacht, he sold his remaining half share in Rising Sun to Geffen in 2010.

In 2009, Russian Billionaire Roman Abramovich agreed to a divorce settlement with his wife Irina that resulted in her taking ownership of the 115-meter (377 ft) yacht Pelorus. Approached on Geffen's behalf by broker Merle Wood, Geffen bought Pelorus in 2011 for $300 million.

Geffen was named one of the 2010 recipients of Ahmet Ertegun Award from the Rock and Roll Hall of Fame. Geffen was awarded with the President's Merit Award for "indelible contributions to the music industry" from the National Academy of Recording Arts and Sciences at the 53rd Grammy Awards in February 2011.

He was the subject of an American Masters PBS television documentary entitled Inventing David Geffen. The documentary was directed by Susan Lacy and was first broadcast on 20 November 2012.

Wealth-X reported in June 2013 that Geffen owns the most valuable private art collection in the world, and estimated its worth at $1.1B at the time.

In 2015, Geffen pledged $100 million toward renovation of what was then called Avery Fisher Hall, part of Lincoln Center for the Performing Arts in New York. His gift, which amounted to about 20% of the hall's renovation costs, gave him naming rights in perpetuity over the building, now known as David Geffen Hall.

In February 2016, Bloomberg News reported that Geffen had sold De Kooning's 1955 oil painting, Interchanged, for $300 million, and Pollock’s 1948 painting, Number 17A, for $200 million, both to hedge fund Billionaire Ken Griffin.