In 1988, he received a bachelor of arts degree magna cum laude in history from Harvard College. His thesis was "Scaling the Ivy Wall: the Jewish and Asian American Experience in Harvard Admissions." In 1992, he received an MBA from Harvard Business School.

In 1992, Ackman founded the investment firm Gotham Partners with fellow Harvard graduate David P. Berkowitz. This investment firm made small Investments in public companies. In 1995, Ackman partnered with the insurance and real estate firm Leucadia National to bid for Rockefeller Center. Although they did not win the deal, the bid caused increased interest in Gotham Partners from Investors, which led to $500 million in assets by 1998. By 2002, Gotham Partners had become entrenched in litigation with various outside shareholders who also owned an interest in the same companies in which Gotham invested.

He married Karen Ann Herskovitz, a graduate of Harvard University and landscape Architect, on July 10, 1994 and they have three children. On December 22, 2016, it was reported that the couple had separated.

Despite an ongoing probe of his trading by New York State and federal authorities, in 2002, Ackman began research challenging MBIA's AAA rating. He was charged fees for copying 725,000 pages of statements regarding the financial services company in his law firm's compliance with a subpoena. Ackman called for a division between MBIA's bond insurers' structured Finance Business and its municipal bond insurance Business.

In 2003, a feud developed between Ackman and Carl Icahn over a deal involving Hallwood Realty. They agreed to a "schmuck insurance", under which, if Icahn were to sell the shares within 3 years and made a profit of 10% or more, he and Ackman would split the proceeds. Icahn paid $80 per share. In April 2004, HRPT Property Trust acquired Hallwood, paying $136.16 per share. Under the terms, Icahn owed Ackman Investors about $4.5 million, but refused to pay. Ackman sued. Eight years later, the Court forced Icahn to pay $4.5 million, plus 9% interest per year since the date of the sale.

In 2004, with $54 million in funding from his personal funds and from his former Business partner, Leucadia National, Ackman started Pershing Square Capital Management. In 2005, Pershing bought a significant share in the fast food chain Wendy's International and successfully pressured it to sell its Tim Hortons doughnut chain. Wendy's spun off Tim Hortons through an IPO in 2006 and raised $670 million for Wendy's Investors. After Ackman sold his shares at a substantial profit after a dispute over executive succession, the stock price collapsed, raising criticism that the sale of Wendy's fastest-growing unit left the company in a weaker market position. Ackman blamed the poor performance on their new CEO.

In 2006, Ackman co-founded The Pershing Square Foundation, alongside his wife at the time Karen, to support innovation in the areas of economic development, education, Health care, human rights, arts and urban development. Since it was founded, the foundation has committed more than $400 million in grants and social Investments. In 2011, the Ackmans were among The Chronicle of Philanthropy’s "Philanthropy 50" list of the most generous donors.

In December 2007, his funds owned a 10% stake in Target Corporation, valued at $4.2 billion through the purchase of stock and derivatives.

His investing style and Investments have had its fair share of critical praise and criticism from U.S. federal and state government officials, heads of other hedge funds, various Retail Investors, and the general public. Ackman's most notable market plays include shorting MBIA's bonds during the 2008 financial crisis, his proxy battle with Canadian Pacific Railway, as well as his stakes in the Target Corporation, Valeant Pharmaceuticals, and Chipotle Mexican Grill. From 2012 to 2018, Ackman held a US$1 billion short against the nutrition company Herbalife, a company he has claimed is a pyramid scheme designed as a multi-level marketing firm. His efforts were documented in the documentary film Betting on Zero.

At a panel meeting discussing Bernie Madoff in January 2009, Ackman defended his longtime friend Ezra Merkin, stating, "Has Ezra committed a crime? I don’t think so,” "I think [Merkin] is an honest person, an intelligent person, an interesting person, a smart investor." In April 2009, Merkin was charged with civil fraud by the State of New York, for "secretly steering $2.4 billion in client money into Bernard Madoff's Ponzi fraud without their permission." A settlement was reached on June 2012 requiring Merkin to pay $405 million to victims including the Metropolitan Council on Jewish Poverty.

Ackman started buying J. C. Penney shares in 2010, paying an average of $22 for 39 million shares or 18 percent of Penney's stock. In August 2013, Ackman's two-year campaign to transform the department store came to an abrupt end after he decided to step down from the board following an argument with fellow board members.

In December 2012, Ackman issued a research report that was critical of Herbalife's multi-level marketing Business model, calling it a pyramid scheme. Ackman disclosed that his hedge fund, Pershing Square Capital Management, sold short the company's shares directly (not with derivatives) starting in May 2012, which led Herbalife's stock price to drop. In 2014, Ackman spent $50 million on a public relations campaign against Herbalife, which was designed to negatively impact the company's stock price. Ackman pays about $100 million annually to maintain his short position.

Ackman's position on Herbalife led to a discussion on live television with Herbalife supporter Carl Icahn for nearly half an hour on CNBC on January 25, 2013. During the segment, Icahn called Ackman "a crybaby in the schoolyard" and claimed that going public with his short position would eventually force Ackman into the "mother of all short squeezes." On November 22, 2013, he admitted on Bloomberg Television that Pershing Square's open short position in Herbalife was "$400 million to $500 million" in the red, but that he wouldn't be squeezed out and would hold the short "to the end of the earth".

In July 2014, Challenged Athletes Foundation, which provides Sports equipment to those with physical disabilities, honored Ackman at a gala fundraiser at the Waldorf Astoria hotel in New York City for helping raise a record $2.3 million.

On March 12, 2015, The Wall Street Journal reported that prosecutors in the Manhattan U.S. attorney's office and the FBI were investigating whether people hired by Ackman "made false statements about Herbalife's Business model to regulators and others in order to spur investigations into the company and lower its stock price." In March 2015, U.S. District Judge Dale Fischer, in Los Angeles, California, dismissed a suit filed by Herbalife Investors alleging the company is operating an illegal pyramid scheme. In response to Fischer's ruling, Herbalife stock surged approximately 13 percent. Herbalife and the FTC reached a settlement agreement in July 2016, ending the agency's investigation into the company. On the day of the settlement, Fortune estimated that Ackman lost $500 million.

Ackman endorsed Michael Bloomberg as a prospective candidate for President of the United States in the 2016 presidential election. He has been a long time donor to Democratic candidates and organizations including, Richard Blumenthal, Chuck Schumer, Robert Menendez, the Democratic National Committee, and the Democratic Senatorial Campaign Committee.

In November 2017, Ackman told Reuters that he had covered his short-sell position, but will continue to bet against Herbalife using put options using no more than 3% of Pershing Square's funds.

On February 28, 2018, Ackman exited his near billion dollar bet against Herbalife after the company's stock price continued to rise, choosing to build his position in United Technology corp instead.