In an early role, he performed on stage with Henry Fonda in the classic wartime story Mister Roberts as a replacement, playing Ensign Pulver. In 1950, he was onstage again with Fonda in Critic's Choice; Howard Taubman of The New York Times called him "properly obnoxious as the director". Hamilton was teamed once more with Fonda in 1968 for the drama film The Boston Strangler.

Hamilton complained in a newspaper article about being typecast, stating "After I was first cast as a heavy on The Untouchables, I couldn't ever persuade them [producers] that I could also do something else." While comic roles were rare for Hamilton during his Hollywood career, he had one opposite Andy Griffith in the 1958 military comedy No Time for Sergeants, as well as an appearance in Steven Spielberg's raucous comedy, 1941 released in 1979. He also appeared in a comedic guest spot on Mama's Family in the second-season episode, "Mama Cries Uncle", as Uncle Roy. He was more often cast in dramatic works, such as the stark science-fiction drama Seconds (1966), which starred Rock Hudson. In two of his most distinctive performances, Hamilton appeared with Paul Newman in The Hustler (1961), playing Findley, a wealthy billiards player who gambles for high stakes, and in The Graduate (1967) as Mr. Robinson, husband of the seductress Mrs. Robinson. In 1975, Hamilton appeared again with Newman in The Drowning Pool. He also worked with Robert Redford in a pair of films, The Way We Were (1973) and Brubaker (1980).

In the 1959-60 television season, Hamilton also co-starred with william Demarest, Jeanne Bal, and Stubby Kaye in the NBC sitcom Love and Marriage. He played attorney Steve Baker, who resides in an apartment with his wife (played by Bal), two daughters and a father-in-law (portrayed by Demarest). He soon appeared as a guest star on another sitcom, The Real McCoys, starring Walter Brennan, on ABC. In 1961, he appeared in another science fiction series, Way Out, hosted by Roald Dahl, with fellow guest stars Doris Roberts and Martin Huston. In 1986, he played Curtis "Big Daddy" Hollingsworth, Blanche Devereaux's father, in a first-season episode of The Golden Girls.

For many years both before and during his film career, Hamilton was a prominent dramatic stage actor, earning a Tony Award nomination for his role in the 1965 production of Absence of a Cello. New York Times theater critic Brooks Atkinson praised his work in the play Stockade, which was based on a part of the James Jones novel From Here to Eternity: "Murray Hamilton is an ideal Prewitt. Modest in manner, pleasant of voice, he has a steel-like spirit that brings Prewitt honestly to life." When the actor was suffering from cancer and found film roles harder to come by, his old co-star George C. Scott helped out by getting him a part in the made-for-television movie The Last Days of Patton (1986).

His best known performance is as Larry Vaughn, the obdurate mayor of Amity, in the Steven Spielberg thriller Jaws (1975). Hamilton reprised the role in the sequel, Jaws 2 in 1978. Other notable big-screen appearances include the critically acclaimed 1959 film Anatomy of a Murder with James Stewart, in which he played the bartender Al Pacquette, who gives testimony in the murder of Barney Quill. He worked again with Stewart in The Spirit of St. Louis (1957) and The FBI Story (1959).