Russell received his A.B. degree from Amherst College, where he majored in English and Political Science, in 1981. He wrote his senior thesis on the United States intervention in Chile from 1963 to 1973.

In 1987, Russell wrote, produced, and directed Bingo Inferno: A Parody on American Obsessions, a film about an obsessive bingo-playing mother. Two years later, he made another short titled Hairway to the Stars, which featured Bette Davis and william Hickey. Both shorts were shown at the Sundance Film Festival.

The success of those two films led to the satirical Gulf War black comedy Three Kings, starring George Clooney, Mark Wahlberg, Ice Cube and Spike Jonze. Adapted from an earlier script by former stand-up comic John Ridley, the film follows three American GIs who devise a plan to steal hidden Kuwaiti gold during the 1991 Iraqi uprising against Saddam Hussein. Filmed in the deserts of Arizona, California and Mexico, and featuring actual Iraqi refugees as extras, Russell used several unique cinematic techniques to achieve a feeling of realism. He filmed using handheld cameras and Steadicam, and shot on Ektachrome slide photography stock that was cross processed in colour negative chemicals, to reproduce "the odd colour of the newspaper images [of the Gulf War]." He also insisted on filming all of the explosions in one shot, unlike a typical action film.

Russell was married to Janet Grillo, who was a Producer at Fine Line Features, from 1992 to 2007. He has been with his partner, Holly Davis, since 2007. Davis is a costume designer. Russell has two children: one with Grillo and an adopted son with Davis. He resides in Santa Monica, California, and is an advocate for mental illness treatment and support, and an active supporter of Autism research. Russell’s efforts saw him named the “Essential Puzzle Piece honoree” by the Light Up the Night Gala for Autism.

Spanking the Monkey, the 1994 independent dark comedy, was his first directorial effort. The film was produced by Dean Silvers, and starred Jeremy Davies as a troubled young man and Alberta Watson as his lonely mother. Despite the controversial subject matter, the film received critical acclaim and won him Best First Screenplay and Best First Feature from the Independent Spirit Awards, as well as the Audience Award at the Sundance Film Festival.

His next project was the Miramax comedy Flirting with Disaster (1996), his second collaboration with Dean Silvers, and first with Harvey Weinstein. The film follows a neurotic man (Ben Stiller) who travels with his wife (Patricia Arquette) and a high-strung caseworker (Téa Leoni) to find his biological parents. The film also starred Mary Tyler Moore, George Segal, Alan Alda, Josh Brolin, Richard Jenkins, and Lily Tomlin. It was screened in the Un Certain Regard section at the Cannes Film Festival, and was well received by most critics. Roger Ebert said of the direction, "Russell finds the strong central line all screwball begins with, the seemingly serious mission or quest, and then throws darts at a map of the United States as he creates his characters." Lisa Schwarzbaum of Entertainment Weekly gave the film a 'B' and declared it "one of the ha-ha funniest comedies currently at a theater near you."

Three Kings was released in 1999 and was his biggest critical and financial success. It grossed $60 million in the United States and over $100 million worldwide. It holds a 94% at Rotten Tomatoes, with the consensus "Three Kings successfully blends elements of action, drama, and comedy into a thoughtful, exciting movie on the Gulf War." It ended up being the first of several collaborations with Mark Wahlberg. During filming, news spread of Russell and George Clooney nearly having a fistfight on the set. In a 2000 interview, Clooney described his confrontation with Russell after tensions on the set had been steadily increasing. According to Clooney, Russell was demeaning the crew verbally and physically. Clooney felt this was out of line and told Russell, "David, it's a big day. But you can't shove, push or humiliate people who aren't allowed to defend themselves." After the confrontation escalated when, according to Sharon Waxman in "Rebels on the Backlot," Russell actually headbutted Clooney and Clooney grabbed Russell by the throat, Clooney said Russell eventually apologized and filming continued, but Clooney described the incident as "truly, without exception, the worst experience of my life." When asked if he would work with Russell again, Clooney responded, "Life's too short." In early 2012, Clooney indicated that he and Russell had mended their relationship, saying "We made a really, really great film, and we had a really rough time together, but it's a case of both of us getting older. I really do appreciate the work he continues to do, and I think he appreciates what I'm trying to do."

David O. Russell is on the board of Ghetto Film School (GFS), an organization that was founded in 2000 to educate American storytellers. Russell learned about GFS in 2002 while earning an honorary degree from his alma mater, Amherst College, from two students who introduced him to Joe Hall, President of Ghetto Film School. Shortly after, Russell joined the board of the organization.

Nailed is a political comedy co-written by Russell and Kristin Gore, and stars Jessica Biel, Jake Gyllenhaal, Tracy Morgan, Catherine Keener, Paul Reubens, James Brolin and Kirstie Alley. Production was delayed or shut down four times in 2008, resulting in IATSE shutting down production because the crew was not getting paid. Actor James Caan left mid-production "due to creative differences and [the] split was amicable."

In 2010, Russell returned with The Fighter, a biographical Sports drama produced by and starring Mark Wahlberg. The film focuses on junior welterweight boxer Mickey Ward's rise to claim the WBU Light Welterweight title, as well as his difficult relationship with his mother, Alice Ward (Melissa Leo), and his older half-brother Dickie Eklund (Christian Bale). The film became a major critical and financial success, grossing $125 million, and appearing on several critics' year-end top ten lists. The Fighter also received seven Academy Award nominations, including Best Picture and Best Director for Russell, the first of his career, and earned awards for both Bale and Leo, for Best Supporting Actor and Best Supporting Actress, respectively.

Russell received the Hollywood Director Award at the 16th annual Hollywood Film Awards and an Indie Impact Award at the Palm Springs International Film Festival for his work on the film, as well as two Independent Spirit Awards (Best Director, Best Screenplay), two Satellite Awards (Best Director, Best Adapted Screenplay), a BAFTA Film Award (Adapted Screenplay), and the AFI Award for Movie of the Year. Silver Linings Playbook won the People's Choice Award at the 2012 Toronto International Film Festival and garnered four Golden Globe Award nominations (with one win for Jennifer Lawrence, Best Performance by an Actress in a Motion Picture – Musical or Comedy) and eight Academy Award nominations, including Best Picture, Best Director (Russell), Best Adapted Screenplay (Russell), Best Actor in a Leading Role (Bradley Cooper), Best Actress in a Leading Role (winner, Jennifer Lawrence), Best Supporting Actor (Robert De Niro), Best Supporting Actress (Jacki Weaver) and Best Film Editing (Jay Cassidy and Crispin Struthers).

In 2013 Russell visited Washington DC to meet with Vice President Joe Biden and Senator Debbie Stabenow to discuss a new bill regarding Mental Health Care. In May 2014 Russell participated in a panel at Paley Center for the Media that discussed projects which have brought to light the stigmas and suffering associated with mental illness. Russell serves on the Creative Council of Represent.Us, a nonpartisan anti-corruption organization.

On June 16, 2014, Ghetto Film School opened its new branch in Los Angeles. This was thanks in part to Russell with an assist from 21st Century Fox co-COO James Murdoch.

In October 2015, Russell and Jim Gianopulos hosted the premiere of Ghetto Film School Los Angeles fellows' thesis film Devil's Gate.

During her 2016 Golden Globe acceptance speech for Best Performance by an Actress in a Motion Picture – Comedy or Musical, Lawrence credited her win, and previous wins to Russell.