Yuen trained in the traditional Peking opera role of Wu-Shen. He began his acting career at age 37, in the first Wong Fei-hung film to star Kwan Tak-hing, Story of Huang Feihong (1949), though his film appearances were rare until the late 1950s. He is best known for portraying mentors and kung fu masters, and featured in almost 150 films throughout his career.

The Rapper Ol' Dirty Bastard took his name from one of Yuen's films Ol' Dirty & The Bastard. Wu-Tang's lyrics were often inspired by 1970s kung fu films.

One of his internationally best-known films came late in his career, Drunken Master (1978), in which he played Beggar So (Sam Seed in some English dubs), an old hermit who had mastered the art of drunken boxing, aiding a young Wong Fei-hung, played by Jackie Chan. The role was a reprisal (in all but name) of the one he had played in another of Chan's films, Snake in the Eagle's Shadow (1978). At the time, Drunken Master proved to be the most successful film to feature Chan. The film portrayed Wong Fei-hung as a young and mischievous rascal as opposed to the venerable, Confucian master of kung fu played in many films by Kwan Tak-hing. The movie was a surprise international hit, and greatly helped to boost the career of the then 66-year-old actor. Yuen reprised the role of The Beggar So for three further films, Dance of the Drunk Mantis, Story of Drunken Master, and World Of The Drunken Master (in which he had a cameo).

On January 8, 1979, Yuen died of heart attack. He was 66 years old. Yuen was considered for the role of Beggar So in the 1979 film Magnificent Butcher alongside Sammo Hung, but died as production of the film began. Yuen was replaced by Fan Mei-sheng (father of the Story of Ricky star Fan Siu-wong). Filming was continued with Fan's Drunken Master character, which necessitated reshooting some of Yuen's scenes. However, Fan's character is never referred as "Beggar So" in this film.