As was traditional among the matrilineal Lakota, in which the children belonged to the mother's clan and people, Red Cloud was mentored as a boy by his maternal uncle, Old Chief Smoke (1774–1864). Old Chief Smoke played a major role in the boy's childhood. He brought Red Cloud into the Smoke household when the boy's parents died around 1825. At a young age, Red Cloud fought against neighboring Pawnee and Crow bands, gaining much war experience.

Red Cloud's War was the name the US Army gave to a series of conflicts fought with Native American Plains tribes in the Wyoming and Montana territories. The battles were waged between the Northern Cheyenne, allied with Lakota and Arapaho bands, against the United States Army between 1866 and 1868. In December 1866, the Native American allies attacked and defeated a United States unit in what the whites would call the Fetterman Massacre (or the Battle of the Hundred Slain), which resulted in the most US casualties of any Plains battle up to that point.

The treaty established the Great Sioux Reservation, covering the territory of West River, west of the Missouri River in present-day Nebraska (which had been admitted as a state in 1867), and including parts of South Dakota. Uneasy relations between the expanding United States and the natives continued. In 1870, Red Cloud visited Washington D.C., and met with Commissioner of Indian Affairs Ely S. Parker (a Seneca and U.S. Army General), and President Ulysses S. Grant.

After signing the Treaty of Fort Laramie (1868), Red Cloud led his people in the important transition to reservation life. Some of his US opponents mistakenly thought of him as overall leader of the Sioux (Dakota, Lakota, and Nakota) groups. The large tribe had several major divisions and was highly decentralized. Bands among the Oglala and other divisions operated independently, even though some individual Leaders, such as Red Cloud, were renowned as warriors and highly respected as Leaders.

In 1871, the government established the Red Cloud Agency on the Platte River, downstream from Fort Laramie. As outlined in the 1868 Treaty, the agency staff were responsible for issuing weekly rations to the Oglala, as well as providing the annually distributed supply of cash and annuity goods. The agent and Washington officials would determine how much of the annuity was to be paid in cash or goods, and sometimes the supplies were late, in poor condition, inadequate in amount, or never arrived at all. Red Cloud took his band to the agency (a predecessor of the Native American reservation) and tried to help them in the transition to a different way of life. In the fall of 1873, the agency was removed to the upper White River in northwestern Nebraska.

Red Cloud was the most photographed American Indian of the nineteenth century. He was first photographed in 1872 in Washington D.C. by Mathew Brady, just before meeting with President Grant. He was among the Indians photographed by Edward S. Curtis. In 2000, he was posthumously selected for induction into the Nebraska Hall of Fame. There are 128 known photographs picturing Red Cloud. He has been honored by the United States Postal Service with a 10¢ Great Americans series postage stamp.

Red Cloud settled at the agency with his band by the fall of 1873. He soon became embroiled in a controversy with the new Indian agent, Dr. John J. Saville.

In 1874, Lieutenant Colonel George Custer led a reconnaissance mission into Sioux territory that reported gold in the Black Hills, an area held sacred by the local Native Americans. Previously the Army had unsuccessfully tried to keep miners out of the region, and the threat of violence grew. In May 1875, Lakota delegations headed by Red Cloud, Spotted Tail, and Lone Horn traveled to Washington in an attempt to persuade President Grant to honor existing treaties and stem the flow of miners into their lands. The Native Americans met on various occasion with Grant, Secretary of the Interior Delano, and Commissioner of Indian Affairs Smith. He told them on May 27 that Congress was ready to resolve the matter by paying the tribes $25,000 for their land and resettling them into Indian Territory. The delegates refused to sign such a treaty, with Spotted Tail saying about the proposal:

Although Red Cloud was unsuccessful in finding a peaceful solution, he did not take part in the Lakota war of 1876-1877, which was led by Tȟašúŋke Witkó (Crazy Horse) and Tȟatȟáŋka Íyotake (Sitting Bull).

In the fall of 1877, the Red Cloud Agency was removed to the upper Missouri River. The following year it was removed to the forks of the White River, in present-day South Dakota, where it was renamed the Pine Ridge Indian Reservation.

In 1884, he and his family, along with five other Leaders, converted and were baptized as Catholics by Father Joseph Bushman.

Red Cloud continued fighting for his people, even after being forced onto the reservation. In 1887 Red Cloud opposed the Dawes Act, which broke up communal tribal holdings, and allocated 160-acre plots of land to heads of families on tribal rolls for subsistence farming. The US declared additional communal tribal lands as excess, and sold it to immigrant settlers. In 1889 Red Cloud opposed a treaty to sell more of the Lakota land. Due to his steadfastness and that of Sitting Bull, government agents obtained the necessary signatures for approval through subterfuge, such as using the signatures of children. He negotiated strongly with Indian Agents such as Dr. Valentine McGillycuddy.

Outliving all the other major Lakota Leaders of the Indian Wars, Red Cloud died on Pine Ridge Reservation in 1909 at the age of 87, and was buried there in the cemetery now bearing his name. In old age, he is quoted as having said, "They made us many promises, more than I can remember. But they kept but one -- They promised to take our land ... and they took it."

Oliver Red Cloud died July 4, 2013 at the age of 93. He was the fourth-generation direct descendant of Red Cloud. Oliver was a leader of the Oglala Lakota people and Speaker of the traditional Lakota Sioux Nation. He was the Chairman of the "Black Hills Sioux Nation Treaty Council".