Thomas developed exceptional basketball skills at an early age and became a highly sought-after college prospect. After helping the U.S. team win the gold medal in the Pan-American Games in 1979, he entered Indiana University, leading the Hoosiers to a national championship in 1981. He then entered the NBA draft and was the second overall pick, selected by the Detroit Pistons.

Though considered small, standing 6 feet 1 inch (1.85 metres) tall, Thomas proved himself to be a dominant player on the strength of his ball-handling skills and his fearless drives to the basket. In 1988 he led Detroit to the NBA Finals, narrowly losing the title to the Los Angeles Lakers. In a 1989 rematch, however, the Pistons prevailed, capturing their first NBA championship. The following year, the Pistons repeated as champions by defeating the Portland Trail Blazers, and Thomas was named Most Valuable Player of the finals. Detroit's title teams were noted for their tough, physical play, earning the nickname “Bad Boys.”

During his 13-year career, Thomas became the Pistons' all-time leader in points, assists, steals, and games played. He was also the fourth NBA player to amass more than 9,000 assists. In the years following his retirement as a player in 1994, Thomas served as head coach of the Indiana Pacers (2000–03) and as a top executive for the Toronto Raptors (1994–98), the Continental Basketball Association (1998–2000), and the New York Knicks (2003–08). In 2006 he became head coach of the Knicks. However, after posting a 56–108 record during his first two seasons, he was fired in 2008. Thomas was inducted into the Naismith Memorial Basketball Hall of Fame in 2000.