As a child, Hama studied Kodokan Judo and later studied Ky?d? (Japanese archery) and Iaido (Japanese martial art swordsmanship). Planning to become a painter, Hama attended Manhattan's High School of Art and Design, where one instructor was former EC Comics artist Bernard Krigstein. Hama sold his first comics work to the fantasy film magazine Castle of Frankenstein when he was 16 years old. After high school, Hama took a job drawing shoes for catalogs, and then served in the United States Army Corps of Engineers from 1969 to 1971, during the Vietnam War, where he became a firearms and explosive ordinance expert. Hama's experiences in Vietnam informed his editing of the 1986-1993 Marvel Comics series The 'Nam. Upon his discharge, Hama became active in the Asian community in New York City.

High-school classmate Ralph Reese, who had become an assistant to famed EC and Marvel artist Wally Wood, helped Hama get a similar job at Wood's Manhattan studio. Hama assisted on Wood's comic strips Sally Forth and Cannon, which originally ran in Military News and Overseas Weekly and were later collected in a series of books. During this time, he also had illustrations published in such magazines as Esquire and Rolling Stone, and he and Reese collaborated on art for a story in the underground comix-style humor magazine Drool #1 (1972). Through contacts made while working for Wood, Hama began working at comic-book and commercial artist Neal Adams' Continuity Associates studio; with other young contemporaries there, including Reese, Frank Brunner and Bernie Wrightson, Hama became part of the comic-book inking gang credited as the "Crusty Bunkers." His first known work as such is on the Alan Weiss-penciled "Slaves of the Mahars" in DC Comics' Weird Worlds #2 (Nov. 1972).

Hama began penciling for comics a year-and-a-half later, making an auspicious debut succeeding character co-creator Gil Kane on the feature "Iron Fist" in Marvel Premiere, taking over with the martial arts superhero's second appearance and his next three stories (#16-19, July-Nov. 1974). He went on to freelance for start-up publisher Atlas/Seaboard (writing and penciling the first two issues of the sword & sorcery series Wulf the Barbarian, writing the premiere of the science fiction/horror Planet of Vampires); some penciling work on the seminal independent comic book Big Apple Comix #1 (Sept. 1975); and two issues of the jungle-hero book Ka-Zar before beginning a long run at DC Comics.

There, Hama became an editor of the DC titles Wonder Woman, Mister Miracle, Super Friends, The Warlord, and the TV-series licensed property Welcome Back, Kotter from 1977—1978, then joined Marvel as an editor in 1980.

Hama is best known as writer of the Marvel Comics licensed series G.I. Joe, based on the Hasbro line of military action figures. Hama said in a 2006 interview that he was given the job by then editor-in-chief Jim Shooter after every other writer at Marvel had turned it down. Hama at the time had recently pitched a Agent of S.H.I.E.L.D. spin-off series, Fury Force, about a daring special mission force. Hama used this concept as the back-story for G.I. Joe. He included military terms and strategies, Eastern philosophy, martial arts and historical references from his own background. The comic ran 155 issues (February 1982-October 1994).

Hama also wrote the majority of the G.I. Joe action figures' file cards—short biographical sketches designed to be clipped from the G.I. Joe and Cobra cardboard packaging. In 2007 these filecards were reprinted in the retro packaging for the G.I. Joe: A Real American Hero 25th Anniversary line.

Many of the characters were named after Hama's family, friends, and comrades who died during the Vietnam War, whereas others were named after historical figures. The Arctic trooper Frostbite was named "Farley Seward" in reference to United States Secretary of State William H. Seward, known for his 1867 his purchase of Alaska from Imperial Russia. The Japanese-American martial arts expert Quick Kick, was named "MacArthur S. Ito" after U.S. World War II Gen. Douglas MacArthur and Japanese Lt.-Gen. Takeo Ito. Other characters were given tongue-in-cheek names: Hovercraft pilot Cutter is Skip A. Stone, named after the pastime of stone skipping.

Hama earned an unexpected female following for G.I. Joe by writing strong female characters (Cover Girl, Lady Jaye, Scarlett) who fought equally along their male counterparts.

Hasbro sculptors sometimes used real people's likenesses when designing its action figures. In 1987, Hasbro released the Tunnel Rat action figure. The character is an Explosive Ordnance Disposal specialist, whose likeness was based on Hama.

In December 2007, Hasbro released 25th-anniversary comic-book figure two-packs that featured original stories by Hama. These new Hasbro-published issues were designed to take place "in-between the panels" of the Marvel series.

In September 2008, IDW announced a new line of GI Joe comics with one series, GI Joe Origins, written by Hama.

In an August 2009 audio interview with The Handsome Genius Club Radio Show, Hama admitted to having never watched an entire episode of any of the various G.I. Joe cartoon series.

At Marvel in the early 1980s Hama edited the Conan titles, and from 1986—1993, he edited the acclaimed comic book The 'Nam, a gritty Marvel series about the Vietnam War.

Hama wrote the 16-issue Marvel series The Ultimate Ninja (Aug. 1989 - Sept. 1990), concerning the adventures of John Doe, an American ninja and Special Forces commando in an alternate reality in which World War III is sparked after the world's nuclear weapons stockpiles are all destroyed. Hama also edited a relaunch of Marvel's black-and-white comics magazine Savage Tales, overseeing its change from sword-and-sorcery to men's adventure. Other comics Hama has written include Wolverine, Ben Grimm and Logan, The Punisher War Zone, and the X-Men brand extension Generation X for Marvel; and Batman stories for DC Comics. He wrote filecards for Hasbro's line of sci-fi/police action figures, C.O.P.S. 'n' Crooks and contributed to the relaunch of the G.I. Joe toy line and comic book in 2000.

While working at Neal Adams' Continuity Associates, Hama developed a series he first created in 1978, Bucky O'Hare, the story of a green anthropomorphic rabbit and his mutant mammal sidekicks in an intergalactic war against space amphibians. Bucky O'Hare went on to become a comic, cartoon, video game and toy line.

In 2006, Osprey Publishing announced that Hama had been commissioned to write for their "Osprey Graphic History" series of comic books about historical battles, including the titles The Bloodiest Day—Battle of Antietam and Surprise Attack—Battle of Shiloh (both with artist Scott Moore) and Fight to the Death: Battle of Guadalcanal and Island of Terror—Battle of Iwo Jima (with artist Anthony Williams). That same year, Hama returned to his signature characters with the Devils Due Publishing miniseries G.I. Joe Declassified, which chronicled the recruitment of the squad's first members by General Hawk. In 2007, the company added the spin-off series Storm Shadow, written by Hama and penciled by Mark A. Robinson which ceased publication with issue 7.

In February 2008, Devil's Due Publishing published Spooks, a comic book about a U.S. government anti-paranormal investigator/task force. Hama created the military characters and R.A. Salvatore the monster characters.

As of June 2009, Larry Hama is the writer of Barack the Barbarian, a Conan the Barbarian parody starring United States President Barack Obama.