Gallico was born in New York City. His father was an Italian, and his mother came from Austria; they had emigrated to New York in 1895. Gallico graduated from Columbia University in 1919 and first achieved notability in the 1920s as a sportswriter, sports columnist, and sports editor of the New York Daily News. His career was launched by an interview with boxer Jack Dempsey in which he asked Dempsey to spar with him, and described how it felt to be knocked out by the heavyweight champion. He followed up with accounts of catching Dizzy Dean's fastball and golfing with Bobby Jones. He became a national celebrity and one of the highest-paid sportswriters in America. He founded the Golden Gloves amateur boxing competition. His 1942 book, Lou Gehrig: Pride of the Yankees was adapted into a classic sports movie.

In the late 1930s, he abandoned sports writing for fiction, first writing an essay about this decision entitled "Farewell to Sport" (published in an anthology of his sports writing, also titled Farewell to Sport (1938)), and became an extremely successful writer of short stories for magazines, many appearing in the then-premier fiction outlet, The Saturday Evening Post. Many of his novels, including The Snow Goose, are expanded versions of his magazine stories.

Gallico once told New York Magazine "I'm a rotten novelist. I'm not even literary. I just like to tell stories and all my books tell stories.... If I had lived 2,000 years ago I'd be going around to caves, and I'd say, 'Can I come in? I'm hungry. I'd like some supper. In exchange, I'll tell you a story. Once upon a time there were two apes.' And I'd tell them a story about two cavemen."

The Snow Goose was published in 1941 in The Saturday Evening Post and won the O. Henry Award for short stories in 1941. Critic Robert van Gelder called it "perhaps the most sentimental story that ever has achieved the dignity of a Borzoi [prestige imprint of publisher Knopf] imprint. It is a timeless legend that makes use of every timeless appeal that could be crowded into it." A public library puts it on a list of "tearjerkers." Gallico made no apologies, saying that in the contest between sentiment and "slime", "sentiment remains so far out in front, as it always has and always will among ordinary humans that the calamity-howlers and porn merchants have to increase the decibels of their lamentations, the hideousness of their violence and the mountainous piles of their filth to keep in the race at all."

His short story, "The Man Who Hated People" was reworked into his book Love of Seven Dolls, which was adapted into the 1953 Oscar-winning motion picture Lili. It was later staged as a musical, Carnival! The versions differ significantly, but all center around the story of a relationship between a puppeteer and a painfully shy and confused young woman. Overhearing her talking to herself about her emotional distress, he speaks to her through his puppets and she develops a relationship with him through them. He has severe emotional problems of his own and bitterly mistreats her.

His novel, Mrs. 'Arris Goes to Paris, published in 1958, was a bestseller, and he wrote three more books about the lovable charlady, 'Mrs. 'Arris'.

The Silent Miaow (1964) purports to be a guide written by a cat, "translated from the feline", on how to obtain, captivate, and dominate a human family. Illustrated with photographs by Suzanne Szasz, it is considered a classic by cat lovers. Other Gallico cat books include Jennie (1950) (American title The Abandoned), Thomasina: The Cat Who Thought She Was God (1957), filmed in 1964 by the Walt Disney Studios as The Three Lives of Thomasina (which was very popular in the former USSR in the early 1990s, inspiring the Russian remake Bezumnaya Lori), and Honorable Cat (1972), a book of poetry and essays about cats.

Gallico's 1969 book The Poseidon Adventure, about a group of passengers attempting to escape from a capsized ocean liner, attracted little attention at the time. The New York Times gave it a one-paragraph review, noting that "Mr. Gallico collects a Grand Hotel [a reference to the 1930 Vicki Baum novel] full of shipboard dossiers. These interlocking histories may be damp with sentimentality as well as brine—but the author's skill as a storyteller invests them with enough suspense to last the desperate journey." In contrast, Irwin Allen's motion picture adaptation of Gallico's book was instantly recognized as a great movie of its kind. In his article "What makes 'Poseidon' Fun?", reviewer Vincent Canby coined the term "ark movie" for the genre including Airport, The High and the Mighty, A Night to Remember, and Titanic (the 1953 movie). He wrote that "the Poseidon Adventure puts the Ark Movie back where God intended it to be, in the water. Not flying around in the air on one engine or with a hole in its side." The movie was enormously successful, spawned a whole decade of disaster films, and is a cult classic today.

In his New York Times obituary, Molly Ivins said that "to say that Mr. Gallico was prolific hardly begins to describe his output." He wrote 41 books and numerous short stories, twenty theatrical movies, twelve TV movies, and had a TV series based on his Hiram Holliday short stories.

Gallico is a self-described "storyteller." Many of his stories are told in the apparently artless style of a folk tale or legend. Like other "storyteller" writers, the charm and power lie in something about the cumulative effect of plainly told detail after plainly told detail. A summary outline of a Gallico story may sound uninteresting, even bordering on ludicrous; an individual quotation broken out of its context falls flat; their essence exists only in their entirety.