As a youth Tracy was bored by schoolwork and joined the navy at age 17. Despite his distaste for academics, he eventually became a premed student at Wisconsin's Ripon College. While there, he auditioned for and won a role in the commencement play and discovered acting to be more to his liking than medicine. In 1922 he went to New York, where he and his friend Pat O'Brien enrolled at the American Academy of Dramatic Arts. That same year, both men made their joint Broadway debut, playing bit roles as robots in Karel Čapek's R.U.R. For the next eight years, Tracy bounced between featured parts in short-running Broadway plays and leading roles in regional stock companies, finally achieving stardom when he was cast as death-row inmate Killer Mears in the 1930 Broadway hit The Last Mile. He subsequently appeared in two Vitaphone short subjects, but he was displeased with himself and pessimistic about his chances for screen stardom.

Nevertheless, director John Ford hired Tracy to star in the 1930 feature film Up the River, which resulted in a five-year stay at Fox Studios in Hollywood. Although few of his Fox films were memorable—excepting perhaps Me and My Gal (1932), 20,000 Years in Sing Sing (1932), and The Power and the Glory (1933)—his tenure at the studio enabled him to develop his uncanny ability to act without ever appearing to be acting. His friend Humphrey Bogart once attempted to describe the elusive Tracy technique: “【You】 don't see the mechanism working, the wheels turning. He covers up. He never overacts or is hammy. He makes you believe what he is playing.” For his part, Tracy always denied that he had come up with any sort of magic formula. Whenever he was asked the secret of great acting, he usually snapped, “Learn your lines!”