His interest in the subject was aroused by the lectures of the British physiologist Michael Foster, and, after graduation from Cambridge in 1873, Balfour obtained one of the university's chairs at the Stazione Zoologica in Naples, an international centre for marine biological research. During the next five years, he made many original observations about the embryonic development of vertebrate urogenital organs (e.g., kidneys, sex organs) and the origin of spinal nerves. These discoveries, along with his descriptions of the initial changes in the ovum after fertilization and of the early stages of the embryo, provided crucial information on the evolution of invertebrates to vertebrates.

He returned to Cambridge in 1876 to lecture on animal morphology and there published A Treatise on Comparative Embryology (1880–81), which laid the foundations of modern embryology. Such was his fame that he was invited to succeed the eminent biologists George Rolleston at Oxford and Sir Charles Wyville Thomson at Edinburgh, but he refused both offers to remain at Cambridge, where in 1882 a special professorship in animal morphology was created for him. Before he could assume his new position, however, he died in a fall while attempting to scale the unconquered Aiguille Blanche of Mont Blanc.