Quaid was born in Houston, Texas, the son of Juanita Bonniedale "Nita" (née Jordan), a real estate agent, and William Rudy Quaid, an electrician. He is the younger brother of actor Randy Quaid.

Quaid has Irish and Cajun ancestry.He attended Pershing Middle School in Houston. He studied drama at Bellaire High School in Bellaire, Texas and later in college, at the University of Houston, under drama coach Cecil Pickett.

After his brother, actor Randy Quaid, was nominated for an Academy Award for his role in The Last Detail, he dropped out of the University of Houston before graduating and moved to Los Angeles, California, to pursue an acting career of his own.

He initially had trouble finding work but began to gain notice when he appeared in Breaking Away (1979) and earned good reviews for his role in The Right Stuff (1983).

Known for his famous grin, Quaid has appeared in both comedic and dramatic roles. Quaid had starring roles in the films Enemy Mine and Innerspace. He also achieved acclaim for his portrayal of Jerry Lee Lewis in Great Balls of Fire! (1989).

Quaid's career lost steam in the early 1990s, after he fought and kicked a cocaine addiction. He continued to garner positive reviews in a variety of films, however, such as Wyatt Earp (1994).

Some of Quaid's most recent film credits include Far From Heaven (2002) (for which he received Golden Globe, Independent Spirit, NYFCC and Screen Actors Guild Award nominations for Best Supporting Actor), In Good Company (2004), The Day After Tomorrow (2004), Yours, Mine and Ours (2005), and Vantage Point (2008).