Yuen was born in Guangzhou, China. He achieved his first directing credit in 1978 on the seminal Snake in the Eagle's Shadow, starring Jackie Chan, followed quickly by Drunken Master. The films were smash hits, launching Jackie Chan as a major film star, turning Seasonal Films into a major independent production company, and starting a trend towards comedy in martial arts films that continues to the present day.

Yuen went on to work with such figures as Sammo Hung in Magnificent Butcher (1979), Yuen Biao in Dreadnaught (1981), Donnie Yen in Iron Monkey (1993), and Jet Li and Michelle Yeoh in Tai Chi Master (1993), and Wing Chun (1994).

Yuen's works, particularly his action choreography on Fist of Legend (1994), attracted the attention of the Wachowskis, who hired him as the martial arts Choreographer on The Matrix (1999). The success of this collaboration, plus his action choreography on the following year's hit Crouching Tiger, Hidden Dragon, made him a highly sought after figure in Hollywood. He went on to work on the Matrix sequels and Kill Bill (2003).

More recent action choreography duties in Hong Kong cinema have included Kung Fu Hustle (2004), starring Stephen Chow, and Fearless (2006), starring Jet Li.

Yuen also choreographed the action sequences in The Forbidden Kingdom (2008), a Hollywood martial arts–adventure film, which was the first film to star together two of the best-known names in the martial arts film genre, Jackie Chan and Jet Li. He worked as a fight choreography consultant on Ninja Assassin (2009).

Yuen went on to work in two south Indian films as a stunt co-ordinator in Enthiran (2010) and I (film) (2014) both were directed by same Director S. Shankar.

In 2015, Yuen directed Crouching Tiger, Hidden Dragon: Sword of Destiny, re-creating many of his signature action choreographies.