Milch graduated summa cum laude from Yale where he won the Tinker Prize in English and was a member of the Delta Kappa Epsilon chapter, along with future U.S. president George W. Bush. He earned an MFA from the Iowa Writers' Workshop at the University of Iowa.

To avoid the draft during the Vietnam War, Milch enrolled in Yale Law School, but was expelled for shooting out a police car siren with a shotgun. Milch then worked as a writing teacher and lecturer in English literature at Yale. During his teaching career, he assisted Robert Penn Warren and Cleanth Brooks in the writing of several college textbooks on literature. Milch's poetry and fiction have been published in The Atlantic Monthly and the Southern Review.

In 1982, Milch wrote a script for Hill Street Blues which became the episode "Trial by Fury". This began his career in television. He worked five seasons on Hill Street Blues as executive story editor and then as executive producer. Milch earned two more Writers Guild Award, a second Humanitas prize, and another Emmy while working on that show.

Milch created NYPD Blue with Steven Bochco and served as Executive Producer of that series for seven seasons. Milch co-created the patrol police drama Brooklyn South with Bochco, Bill Clark, and William S. Finkelstein in 1997 while still working on NYPD Blue. After NYPD Blue, Milch created a CBS series called Big Apple.

From 2002-2006, Milch produced Deadwood, a dramatic series for HBO. Milch served as creator, writer, and executive producer. The series ended in 2006, after three seasons. There were plans for two feature length movies to conclude the series, but after many rumors, star Ian McShane has said that the sets have been struck and the films are highly unlikely to be produced.

Ian McShane presented David Milch with the 2006 Outstanding Television Writer Award at the Austin Film Festival.

Milch began production in 2006 on John from Cincinnati, another dramatic series for HBO. The series was canceled after its first season. Initial ratings had been lower than expected but increased steadily. Ratings for the final episode were more than 3 million.

In October 2007, HBO renewed its contract with Milch. A pilot was commissioned for Last of the Ninth, "a drama set in the New York Police Department during the 1970s, when the Knapp Commission was formed to ferret out corruption in the force." Collaborating with Milch on Last of the Ninth was former NYPD Blue writer and friend Bill Clark. The Watcher - All TV, all the time | Chicago Tribune | Blog In December of 2008, The Hollywood Reporter stated that Last Of The Ninth would not be picked up by the network. The Hollywood Reporter Dec 18 2008

In January of 2010, Milch announced that he was developing a new drama for HBO entitled Luck based around the culture of horse racing. Michael Mann is slated to direct the pilot Variety January 5th 2010 and Dustin Hoffman has been cast. HBO picked up the show to series on July 14th, 2010.

Milch is an owner of thoroughbred racehorses. Notably, as a co-owner with Mark and Jack Silverman, he won the 1992 Breeders' Cup Juvenile with the colt Gilded Time. Milch owned outright Val Royal who captured the 2001 Breeders' Cup Mile.