Skousen was born on a dryland farm in Raymond, Alberta, Canada, the second of nine children of Royal Pratt and Margarita Bentley Skousen, who were U.S. citizens.. He lived in Canada until he was ten years old, then moved with his family to California. In 1926, Skousen went to the Mormon colony, Colonia Juarez, Mexico for two years to help his seriously ill grandmother. While there, he attended the Juarez Academy. Skousen then returned to California, graduating from high school in 1930. At the age of 17 he traveled to Great Britain as a missionary for The Church of Jesus Christ of Latter-day Saints.

After completing his missionary service, Skousen attended San Bernardino Valley Jr. College, graduating in 1935. He married Jewel Pitcher in August 1936, and they raised eight children together. He graduated with an LL.B. from George Washington University Law School in June 1940 (the school updated his degree as Juris Doctor (J.D.) in 1972 with its degree nomenclature).

In June 1935, Skousen went to work for the Agricultural Adjustment Administration, a New Deal program to subsidize farmers. Soon thereafter, he found employment with the Federal Bureau of Investigation (FBI), working as a messenger while attending law school at night. In 1940, after getting his law degree and passing the Washington D.C. bar exam, he became an FBI Special Agent. FBI memos have described his work at the Bureau as mainly clerical and administrative. Skousen left the FBI in 1951. Ironically, the FBI would maintain a file on Skousen that would come to number more than 2,000 pages.

From 1951 to 1955, he taught at Brigham Young University in Provo, Utah. In 1956, Salt Lake City mayor Adiel F. Stewart hired Skousen to serve as Police Chief in the wake of a police department scandal. Skousen was a well-respected police chief for nearly four years. In 1960, newly-elected mayor J. Bracken Lee dismissed Skousen shortly after Skousen raided an illegal poker club where Lee was in attendance. National Review commentator Mark Hemingway characterized the gathering as "a friendly card game." Skousen supporters protested the abrupt firing by disrupting a city council meeting and planting burning crosses on Lee's lawn. Lee characterized Skousen's strict enforcement of anti-gambling laws as Gestapo-like. Lee said that although Skousen was an anti-communist, he "ran the police department in exactly the same manner as the Communists in Russia operate their government." Time magazine reported in 1960 that Skousen's "real offense seemed to be that he had failed to show enough enthusiasm for Lee's determination to slash the police-department budget." Lee told a friend that Skousen was "one of the greatest spenders of public funds of anyone who ever served in any capacity in Salt Lake City government", and a "master of half truths". According to the NCCS (an organization founded by Skousen), Skousen had eliminated the sources of illegal activity in the city by 1959. After Skousen's firing (according to the NCCS), his model police programs were dismantled, and crime increased, on the average, by 22%.

Skousen continued his involvement in law enforcement issues by working as the editor of the police journal, "Law and Order," for fifteen years. He also served as Field Director for the American Security Council. He returned to Brigham Young University as a Professor in the Religion Department in 1967, retiring in 1978.

Throughout the 1960s, Skousen was admired by members and leaders of the John Birch Society, although members of the more mainstream conservative movement ... notably William F. Buckley and the American Security Council ... snubbed him out of fear that his controversial views would hurt the credibility of the conservative movement. Skousen used Birch Society magazines as source and reference material, and was pictured on the cover of its magazine, American Interest. Although he was never officially a member of the organization, he was a member of its speakers' bureau and lectured at John Birch Society events throughout the United States for many years. A 1962 FBI memo described Skousen as affiliating with an "extreme right-wing" group which was promoting "anticommunism for obvious financial purposes". Skousen authored a pamphlet titled The Communist Attack on the John Birch Society, characterizing criticism of the Society as incipient communism.

In 1981, the first year of Ronald Reagan's presidency, Skousen was asked to be a charter member of the conservative think tank the Council for National Policy, founded by Tim LaHaye, author of the Left Behind series of books. Other early participants included Paul Weyrich; Phyllis Schlafly; Robert Grant; Howard Phillips, a former Republican affiliated with the Constitution Party; Richard Viguerie, the direct-mail specialist; and Morton Blackwell, a Louisiana and Virginia activist who is considered a specialist on the rules of the Republican Party. Skousen's proposals with the group included a plan to convert the Social Security system to private retirement accounts, as well as a plan that he claimed would completely wipe out the national debt.

Although Skousen was not a tax protester, he did campaign for several proposals to eliminate the federal income tax. One proposal, the Liberty Amendment, precluded the federal government from involvement in any activities that competed with private enterprise and returned federally-owned land to the states.

In 1970, the LDS church was under considerable attack for its refusal to ordain blacks into its priesthood. In response, Skousen penned an article entitled “The Communist Attack on the Mormons”, in which he accused critics of “distorting the religious tenet of the Church regarding the Negro and blowing it up to ridiculous proportions” and of serving as Communist dupes. The LDS church altered its stance in 1978.

In 1971, Skousen founded a non-profit educational foundation, The Freeman Institute, which sought to provide students a place to read both sides of any political issue from original sources. In 1982, the institute became the National Center for Constitutional Studies (NCCS), a national organization headquartered in Malta, Idaho.

While the LDS had been extremely supportive of Skousen in the 1960s and early 1970s, by 1979, the First Presidency sought to distance itself from him. It issued a letter against promoting Skousen in LDS wards and temples, stating: “This instruction is not intended to express any disapproval of the right of the Freemen Institute and its lecturers to conduct such meetings or of the contents of the lectures. The only purpose is to make certain that neither Church facilities nor Church meetings are used to advertise such events and to avoid any implication that the Church endorses what is said during such lectures.”

Skousen was a member of the Meadeau View Institute, but resigned citing "irregularities" in management. While at the Institute, he mentored Oliver DeMille, and his influence helped shape George Wythe University, a private, unaccredited university in Cedar City, Utah, which grew out of the Meadeau View. Skousen's books are still used as texts at the school.

Skousen spoke against communism, throughout his career. He stood fast with John Birch Society co-founder Robert W. Welch Jr.'s contention that President Dwight D. Eisenhower was a communist agent. He did not believe the U.S. should establish diplomatic relations with the People's Republic of China, claiming that the U.S. State Department was engaging in treason with respect to Secretary of State Henry Kissinger's visit to "his old friend Mao Tse-tung." In the 1970s, he spoke to a Latter-Day Saint group aboard a cruise ship returning from Israel, stating that the previous 10 U.S. national elections had been illegitimate because voters had not truly had a choice. He also referred to what he argued was the betrayal of Chiang Kai-shek.

Skousen spoke of billionaire banker David Rockefeller as being one of the most powerful men in the world. Skousen criticized Rockefeller for praising Mao Zedong in a 1973 New York Times article, in which he stated that the communist leader was one of the greatest leaders of the 20th century. Later Skousen claimed that the Rockefellers and Wall Street had conspired to elect Jimmy Carter president.Skousen was also known as a strong supporter of law and order and believed that local police departments were being undermined in order to promote a national police state.

Skousen authored The Naked Communist and was the source of the publication "1963 Communist Goals" list. In 1970, he wrote The Naked Capitalist based on the book Tragedy and Hope by Carroll Quigley, which claimed that top Western merchant bankers, industrialists and related institutions were behind the rise of communism and fascism around the world. The Naked Capitalist has been cited by many, including Cleon Skousen's nephew Joel Skousen, as proof of a "New World Order" strategy to create a One World Government.

In 1987, controversy erupted in California when the state briefly considered using Skousen's book, The Making of America, as a textbook for California schools. Statements in the book regarding slavery, and its use of the term "pickaninny" as a label for slave children engendered a heated debate as to whether the book was appropriate. The state commission's Executive Director, a former colleague of Skousen at the National Center for Constitutional Studies, asserted that these statements were "largely taken out of context" from a 1934 essay on slavery by the historian Fred Albert Shannon that Skousen had included in his book. Skousen highlights the global history of slavery as independent of color or race in The Making Of America claiming that "... the emancipation of human beings from slavery is an ongoing struggle. Slavery is not a racial problem. It is a human problem."

Skousen had Cleon Skousen began his research for his book The Five Thousand Year Leap in the 1930s while attending law school, combing archives in the Library of Congress for the original writings of such Founding Fathers as John Adams and Thomas Jefferson and continued to work on the manuscript for the next 50 years, finally publishing it in 1981.

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At Skousen's funeral in 2006, he was eulogized by Mormon Apostle Thomas S. Monson. U.S. Senator Orrin Hatch, who had Skousen and Skousen's Freemen Institute as patrons when Hatch ran for the Senate as an unknown in 1976, eulogized Skousen on the floor of the U.S. Senate, saying:

Shortly before I announced that I would be running for the U.S. Senate in 1976 as a political novice and virtually unknown candidate— Cleon was one of the first people of political significance and substance who agreed to meet with me and discuss my candidacy. A few short years before this time, Cleon had organized a nonprofit educational foundation named The Freemen Institute, to foster Constitutionalist principles including a drastic reduction in the size and scope of the Federal Government, and a reverence for the true, unchanging nature of our Constitution. I knew that he had strongly held beliefs and I was very interested in what he had to say. We found in each other at that first meeting many areas of common ground and a shared love for the principles that make America the strongest bastion of freedom on earth. Cleon quickly agreed to help, and throughout the coming months he became a true champion of my candidacy. ... As we all know, Cleon was a prolific author and writer. His books, The First 2000 Years, The Making of America, and The 5,000 Year Leap have been used by foundations, and in forums across America for many years. I loved an account I recently read in the Deseret News from the Reverend Donald Sills, a Baptist minister who became close friends over many years with Cleon. He spoke of his knowledge and study and recalled a time when he found Cleon sitting on the steps of the Jefferson Memorial in Washington, DC. When he asked Cleon what he was doing just sitting there, Cleon’s fitting response was, 'I’m talking to Tom Jefferson.'

In September 2007, a year prior to the 2008 U.S. presidential election, Jan Mickelson of Iowa radio station WHO and Republican Iowa caucus presidential candidate Mitt Romney discussed Skousen in an off-the-air conversation during a break in Mickelson's broadcast, which Mickelson recorded. In the conversation, Mickelson touted Skousen's American Constitutionalism and Romney cited Skousen as an expert on Mormon theology. In commentary about this exchange, the National Review's Mark Hemingway termed Skousen an "...all-around nutjob", Hemingway's stating the belief that The Naked Communist was "so irrational in its paranoia that it would have made Whittaker Chambers blush," adding, "to be fair Skousen wrote on numerous topics with wildly varying degrees of intellectual sobriety. In fact, as the radio host in the YouTube video notes, Skousen’s writings on original intent and the U.S. Constitution in The Making of America are compellingly argued, and to this day are often cited by conservatives unaware of Skousen’s more checkered writings. Further, Skousen’s scriptural commentaries are still very popular well-regarded within the relatively unradical world of mainstream Mormonism, insofar as Mormon theology can be considered unradical."

In fall of 2007, political commentator Glenn Beck began promoting The 5,000 Year Leap on his show, describing it as "divinely inspired" and written by someone "much more intelligent than myself". That book claims that the U.S. Constitution was actually based on Christian virtue as well as Enlightenment philosophy. Skousen's son Paul Skousen asked Beck to write the foreword for a new edition of the book. Texas Governor Rick Perry has also promoted the book.

After Glenn Beck began promoting Skousen's The 5,000 Year Leap in March 2009, it went to number one in sales on the Amazon.com charts and stayed in the top 15 throughout the following summer. In September 2009, the book was being sold at 9-12 Project meetings and was often used as source material for 9-12 Project speakers.

Skousen's book on end times prophecy, The Cleansing of America, was published by Valor Publishing Group in 2010.

Skousen has several notable nephews including Joel Skousen, a survivalist and political author; Royal Skousen, a linguist; Mark Skousen, a libertarian economist and author; and Neil Skousen, a Utah attorney.