Wahl is elusive about his personal life, and has given different birth dates. A Newspaper Enterprise Association syndicated article in 1988, citing records checked by the CBS publicist for Wahl's television series Wiseguy, gives February 14, 1957, a date that corresponds with the year of his high school graduation: "A call to Bremen High School in the Chicago suburb of Midlothian reveals Wahl graduated from there in June 1975, presumably at age 18."

In the late 1960s, it continues, his "family of 8" moved to the New York City borough of The Bronx, where he attended junior high and, for a time, high school. The NEA article, however, says Wahl was the ninth of 11 children from a blue-collar German/Italian family and "attended different high schools as the family moved to the [Chicago] suburbs of Midlothian and Worth." According to Entertainment Weekly, Wahl played baseball, as a shortstop, in unspecified venues that might have included youth leagues and high school teams, before crashing a motorcycle and hurting his knee at age 16. His official biography says he then worked as a janitor while in high school and as a gas-station attendant at his family's Service station. After graduating from Midlothian's Bremen High in 1975 he left home, his bio says, "at the age of 18 ... in his ‘69 Dodge Dart" and crossed the United States working odd jobs. Eventually living in Los Angeles, he worked as an extra on movies including The Buddy Holly Story (1978).

Wahl first gained recognition in 1979 when he was cast in the leading role of Director Philip Kaufman's film The Wanderers.

He was subsequently cast opposite Paul Newman in Fort Apache, The Bronx (1981), and went on to play the lead in movies including Race for the Yankee Zephyr (1981), The Soldier (1982), Jinxed! (1982), Purple Hearts (1984) and other films. In 1984, he then suffered another motorcycle crash, while on his way to meet with Diane Keaton about the role that eventually went to Mel Gibson in the film Mrs. Soffel. Not wearing a helmet, Wahl was injured badly enough to require 89 Stitches in his scalp.

After appearing in the ensemble of the TV-movie The Dirty Dozen: Next Mission (1985) and co-starring with Billy Dee Williams in the six-episode TV series Double Dare, Wahl was cast in the lead role of Vinnie Terranova in the television series Wiseguy in 1987. Wahl said the following year, "The feature market dried up for me. When 'Wiseguy' came along I was hesitant to do it, but I thought the quality was good. I had to make a living, so I decided to do it. I didn't have to audition or anything." The show ran until 1990 and brought Wahl a Golden Globe Award, as well as an Emmy Award nomination. Wahl wrote an episode of Wiseguy in 1989 and directed an episode in 1990.

He went on to star in The Taking of Beverly Hills (1991) and The Favor (1994), as well as a Wiseguy reunion TV-movie in 1996, his final screen performance.

Wahl's acting career was derailed by a broken neck. He claimed that in 1992 he had endured another motorcycle crash, but eventually confessed to having fallen down a FLIGHT of stairs at the home of Comedian Rodney Dangerfield's girlfriend and eventual wife, Joan Child. "We were dating casually ... I stayed over at her house one night, fell down these stairs, and she begged me not to say that in the press", Wahl said in 2004.

In 1995, Wahl was charged with disturbing the peace and arrested on an outstanding warrant for a drunken-driving charge, eventually pleaded nolo contendre to both charges and receiving probation. A year later, he was arrested for allegedly threatening a bartender with a hunting knife for refusing to serve him alcohol. He pleaded nolo contendre again and was ordered to enter a live-in alcohol rehabilitation program. Wahl says he and Barbi married after attending 12-step meetings together.

Wahl married his first wife, former Penthouse Pet of the Year Corinne Alphen, in 1983 or 1984, (sources differ), divorcing in 1991. They have one child, Raymond. Wahl married his second wife, Lorrie Vidal, in 1993 and divorced in 1997. They had one daughter and one son. Wahl said he met Shane Barbi (twin sister of Sia Barb], glamour Models known as the Barbi twins) at a grocery store in 1996, and they married on September 17, 1997. They renewed their wedding vows in 2008.

During the second season, he injured himself again, on an episode directed by Jan Eliasberg. As Wahl recalled in 2004, "She had me walking into my own POV shot, and ... I was stepping up, and the [camera] wheel caught my right heel and it just ripped out the Achilles tendon. ... But she wanted to do it again, so I said, 'Okay, you're the boss.'" Series creator Steven J. Cannell said the camera ran over Wahl a second time, leaving him in such pain Cannell replaced him for three episodes while Wahl healed.

In 2009, Wahl sued his former Business manager, Henry Levine, alleging Levine conspired with Wahl's ex-wife Corinne Alphen, to defraud him.

On January 19, 2010, he offered his Golden Globe Award as part of a reward then being assembled by the Second Chance Rescue Center in Sioux Falls, South Dakota, to help find and convict the person who glued a 7-month-old orange tabby to Minnesota State Highway 60, where travelers found it on December 18, 2009; the cat, which rescuers called Timothy, died days later.

Later in the year he took part in the documentary Saving America's Horses, about both wild and domestic horses and the issues that plague them. In December 2012 he reiterated the need to support wounded veterans, and help reduce suicide rates, by pairing rescued animals with veterans.