After his graduation, Pierce moved to New York City, where during the 1980s and early 1990s he was employed in various jobs, such as selling ties at Bloomingdale's and working as a security guard, while pursuing an acting career and studying at Michael Howard Studios. During this period he played Laertes in a popular off-Broadway production of Hamlet and made his Broadway debut in 1982 in Christopher Durang's Beyond Therapy.

Pierce's first big television break came in the early 1990s with Norman Lear's political comedy, The Powers That Be, in which Pierce played Theodore, a Congressman. Despite positive reviews from critics, the show was canceled after a brief run.

Pierce also appeared alongside Jodie Foster in Little Man Tate, with Anthony Hopkins in Oliver Stone's Nixon, and with Ewan McGregor in Down With Love. He provided the voice for Doctor Doppler in Disney's 42nd animated feature, Treasure Planet, Slim, a stick insect in Pixar's A Bug's Life and Abe Sapien in Guillermo del Toro's Hellboy. In his role in Sleepless in Seattle (1993), Pierce played the brother of Meg Ryan's character, a professor at Johns Hopkins University. The movie was released three months before the start of Frasier. In 2001, he starred in the cult 1981-set summer camp comedy Wet Hot American Summer, as the befuddled Astrophysicist, Prof. Henry Newman.

In part due to his close physical resemblance to Kelsey Grammer, the producers of the Cheers spin-off Frasier created the role of Niles Crane (Frasier Crane's younger brother) for him. Although prior to Frasier going into production, Pierce had petitioned the Screen Actors Guild to change his billing to David Pierce, the name he had used on the stage, the use of his middle name in the show's credits helped reinforce the actor's and the character's "snooty" image. For his work on Frasier, Pierce was nominated for a Best Supporting Actor Emmy a record eleven consecutive years, winning in 1995, 1998, 1999 and 2004.

Pierce provided the voice of Mr. Daedalus in the 1998 Disney show Hercules: The Animated Series. In 2006, he co-starred in the animated pilot for The Amazing Screw-On Head as the Screw-On Head's nemesis Emperor Zombie; however, the series was not picked up. His commercial voiceover work included ads for the Tassimo coffee system, Seattle's Metro Transit, and home furnishings retailer Ikea Canada.

Pierce is known for his distinctive voice and, like his Frasier co-star, Kelsey Grammer, is often called upon to provide voice work. His notable roles include the narrator of the movie The Mating Habits of the Earthbound Human in 1999, walking stick insect Slim in A Bug's Life, Doctor Delbert Doppler in Disney's film Treasure Planet, and the amphibian Abe Sapien in Hellboy. Pierce refused credit for his Hellboy role because he felt it was the performance of Doug Jones, and not his own voice, which ultimately brought the character of Abe Sapien to life. He was the voice for Drix, a cold pill, in the animated comedy Osmosis Jones.

Pierce narrated an audio tour guide, Napa Uncorked, in 2002.

On November 19, 2007, Pierce was awarded an Honorary Doctor of Fine Arts Degree from Niagara University in Lewiston, New York. In 1999 he was awarded an Honorary Degree from Skidmore College, located in his native Saratoga Springs. In 2010, Pierce appeared in a revival of David Hirson's play La Bête directed by Matthew Warchus. The production debuted on London's West End before moving to New York. Also in 2010, Pierce had his first starring film role as Warwick Wilson in the dark comedy/psychological thriller The Perfect Host.

After years of media speculation about his sexuality, Pierce came out in 2007 and later confirmed through his publicist that he and television Writer, Director and Producer Brian Hargrove were a couple. When accepting his Tony Award for Curtains, Pierce thanked "my partner, Brian, because it's 24 years of listening to your damn notes—that's why I'm up here tonight." They married in California on October 24, 2008, just days before Proposition 8 was adopted as law, banning same-sex marriages in the state. On May 28, 2009, while a guest on The View, he publicly announced his marriage to Hargrove and expressed his anger about the approval of Proposition 8.

He and Frasier co-star John Mahoney are godparents to Frasier co-star Jane Leeves' son, Finn. Pierce has spent years working with the Alzheimer's Association on behalf of Americans with Alzheimer's disease. He has appeared in Washington, D.C., to testify in support of expanding funding for treatment, and he publicly campaigned for the National Alzheimer's Project Act. Pierce told MSNBC in 2011, "it is up to us, to all of us, to the American people and to their representatives about whether we face the challenges and make all the effort necessary or if we ignore it and just let this sort of tidal wave crash over us."

Pierce directed the Broadway production of the musical It Shoulda Been You. In 2015 he directed the Manhattan Theater Club production of David Lindsay-Abaire's play Ripcord Off-Broadway at City Center.

Pierce appeared in the Off-Broadway limited engagement of A Life by Adam Bock. The play premiered at the Peter Jay Sharp Theater on October 24, 2016, directed by Anne Kaufman, and closed on November 27.

Pierce appears in the Broadway revival of Hello, Dolly! as Horace Vandergelder. The musical opened on April 20, 2017 at the Shubert Theatre. Pierce received a 2017 Drama League award nomination for Hello, Dolly! and A Life.