Murphy attended Yale University but dropped out in his junior year and began working at a series of jobs—as a Wall Street messenger, a miner, a toolmaker, and a nightclub dancer. He made his Broadway debut as a member of the chorus in Good News (1927) and performed in three other Broadway shows—Hold Everything!, Of Thee I Sing, and Roberta—before making his Hollywood debut in Kid Millions (1934). He appeared with Shirley Temple in Little Miss Broadway (1938), with Judy Garland in Little Nellie Kelly (1940), and with Fred Astaire in Broadway Melody of 1940 (1940). After switching from the Democratic Party to the Republican Party in 1939, he became a close political ally of Ronald Reagan, with whom he appeared in This Is the Army (1943).

Among Murphy's other films were Hold That Co-ed (1938), The Navy Comes Through (1942), Bataan (1943), and Walk East on Beacon (1952), his final film. He served on the board of directors of the Screen Actors Guild (1937–53) and was its president (1944–46); in 1950 he won an Academy Award for career achievement. After retiring from acting, he worked as a motion-picture executive and won election to the U.S. Senate, defeating Pierre Salinger. His 1970 reelection bid failed after it was revealed that he had continued to receive a salary from a film company while serving in the Senate. His autobiography, Say. . . Didn't You Used to Be George Murphy?, was published in 1970.