Vaughan was born in Brisbane, Queensland to a vaudeville Comedian father in 1931. Moving to Sydney, New South Wales at age 17, he was employed in a number of occupations including steam presser, tram Conductor, postman customs clerk and a bassoon player. After taking theatre production classes, he landed his first stage role in 1963 when he was aged 32, and has never been out of work.

He moved into television in 1973. In 1975 he won the Hoyts Prize for Best Performance by an Actor at the AFI Awards, for his role of Australian Prime Minister Billy Hughes in Billy and Percy. This was a tied result with Jack Thompson's role in Sunday Too Far Away. (His continuing interest in Billy Hughes led some years later to the revelation that Hughes's daughter Helen had died in childbirth in London; in 2004 he presented an ABC program on the story.)

His big break came in 1976, when he was chosen to play the lead role of John West in the ABC's 26-part television adaptation of Frank Hardy's novel Power Without Glory. In 1977 he won the Logie Award for Most Popular Actor for this role. He has since appeared in such television programs as The Dismissal (1983 miniseries; as Senator Albert Field), Come In Spinner (1989-90 miniseries), Water Rats, Blue Heelers, All Saints, The Flying Doctors, Salem's Lot (2004 miniseries), and headLand. His feature films include Picnic at Hanging Rock (1975), Letters from Poland (1978), We of the Never Never (1982), Phar Lap (1983), The Man Who Sued God (2001) and Australian Rules. He has also appeared in over 60 stage plays.

In 1983 he was nominated for the AFI Award for Best Actor in a Lead Role, for Phar Lap (as Phar Lap's trainer Harry Telford), and Best Actor in a Supporting Role for The Winds of Jarrah. In 2007, he received a Sydney Theatre Award nomination for best supporting actor in The Seed.