Born in 1911 in Kansas City, Missouri, Bannon attended Rockhurst High School and Rockhurst University, where he played football, baseball, and polo. In 1944, he was ineligible (classified 4-F) for World War II Service, owing to an ulcer, and therefore served as a civilian FLIGHT instructor.

Bannon began his broadcasting career on local radio station KCKN, then briefly at KMOX in St. Louis. He moved to Los Angeles in 1937, beginning his show Business career in radio as an announcer on The Great Gildersleeve, The Chase and Sanborn Hour, and Stars over Hollywood, among others, with his most prominent acting role being that of Detective Jack Packard in the serial I Love a Mystery. A motion-picture adaptation of the show, with Bannon reprising his radio character, was released by Columbia Pictures in 1945 in hopes of launching a franchise, but only two additional pictures would be produced; he later described the original film as "a weakened product" in his 1975 autobiography.

Bannon was the first husband of American Actress and Comedian Bea Benaderet. They wed in 1938 and had two children, Jack (1940-2017) and Maggie (born 1947). However, his Red Ryder contract obligations took a toll on their marriage, and Benaderet filed for divorce in 1950. Their son, Jack Bannon, became an actor like his parents. In 1961, Jim Bannon married Barbara Cork, twenty-three years his junior; the couple divorced in 1981.

Bannon left radio in 1946 to sign with Columbia as a contract player in his attempt to become a Western movie star, but then left the very next year for Republic Pictures. He first served as a stuntman and double before being cast as the lead in his first picture with the company, the 1948 serial Dangers of the Canadian Mounted. While filming The Man from Colorado (1948), Bannon punched Director Charles Vidor during an on-set altercation. Vidor was later fired from the production because of conflicts with star william Holden and replaced by Henry Levin, who had directed Bannon in the I Love a Mystery film adaptation. Bannon teamed with Whip Wilson and Fuzzy Knight in five low-budget Westerns for Monogram Pictures, all released in 1951.

Bannon is best known for being the last of four actors to portray the fictional Cowboy Red Ryder in the long-running B-movie series, completing between 1949 and 1950 what would be the final four pictures in the franchise that were distributed by Eagle-Lion Films, after Republic had let its series rights expire. Bannon openly campaigned for the part by outfitting his car with a Texas Longhorn hood ornament and a Colt 45-style gearshift knob while dressing in Western attire. Upon being cast, he dyed his salt-and-pepper hair red and regularly visited a hairstylist in Louisville, Kentucky, to keep it maintained. Bannon said in 1965 that it was the "toughest part of" playing Red Ryder, "since the pictures were in color." His offscreen requirements in portraying the character included making personal appearances in costume across the country, in addition to a stint with the Tom Packs Circus in 1950.

Following the end of the Red Ryder series, Bannon appeared in films of varying genres before transitioning to Western roles on television. He had a starring role in Flying A Productions' 1955 series The Adventures of Champion, which lasted for one season and 26 episodes, and he then filmed two guest appearances on another Flying A show, Annie Oakley, the next year. Meanwhile, he and fellow Red Ryder actor Allan "Rocky" Lane shot separate pilots for a proposed television series in 1951 and 1955, respectively, but both failed to sell. Bannon relocated to Chicago in 1955 to film one season of soap opera Hawkins Falls, Population 6200.

Bannon worked sporadically in the 1960s with bit parts on programs such as Sea Hunt, Wagon Train, and Lassie. His final role was a one-time guest spot on Death Valley Days in 1965. He then moved to Phoenix, Arizona, to join radio station KTAR as a morning news broadcaster and the host of his own afternoon show.

Later in his life, Bannon suffered from emphysema. He died in Ventura, California, on July 28, 1984, at age 73.