Born Seymour Wilson Schulberg, he was the son of B. P. Schulberg, head of Paramount Pictures and Adeline Jaffe Schulberg, who founded a talent agency taken over by her brother, agent/film producer Sam Jaffe.

Schulberg attended Deerfield Academy and then went on to Dartmouth College, where he was actively involved in the Dartmouth Jack-O-Lantern humor magazine and was a member of the Pi Lambda Phi fraternity. In 1939 he collaborated on the screenplay for Winter Carnival, a light comedy set at Dartmouth. One of his collaborators was F. Scott Fitzgerald, who was fired because of his alcoholic binge during a visit with Schulberg to Dartmouth. Dartmouth College awarded Schulberg an honorary degree in 1960.

While serving in the Navy during World War II, Schulberg was assigned to the Office of Strategic Services (OSS), working with John Ford's documentary unit. Following VE Day, he was among the first American servicemen to liberate the Nazi-run concentration camps. He was involved in gathering evidence against war criminals for the Nuremberg Trials, an assignment that included arresting documentary film maker Leni Riefenstahl at her chalet in Kitzbühel, Austria, ostensibly to have her identify the faces of Nazi war criminals in German film footage captured by the Allied troops.

In 1950, Schulberg published The Disenchanted, about a young screenwriter who collaborates on a screenplay about a college winter festival with a famous novelist at the nadir of his career. The novelist (who at the time was assumed by reviewers to be a thinly disguised portrait of Fitzgerald, who had died ten years earlier) is portrayed as a tragic and flawed figure, with whom the young screenwriter becomes disillusioned. The novel was the 10th bestselling novel in the United States in 1950 and was adapted as a Broadway play in 1958, starring Jason Robards (who won a Tony Award for his performance) and George Grizzard as the character loosely based on Schulberg. In 1958, Schulberg wrote and co-produced (with his younger brother, Stuart) the film Wind Across the Everglades, directed by Nicholas Ray.

Schulberg encountered political controversy in 1951 when screenwriter Richard Collins, testifying to the House Un-American Activities Committee, named Schulberg as a former member of the Communist Party. Schulberg testified as a friendly witness that Party members had sought to influence the content of What Makes Sammy Run and "named names" of other Hollywood communists.

Schulberg was also a sports writer and former chief boxing correspondent for Sports Illustrated. He was inducted into the Boxing Hall of Fame in 2002 in recogniton of his contributions to the sport.

In 1965, after a devastating riot had ripped apart the fabric of the Watts section of Los Angeles, Schulberg formed the Watts Writers Workshop in an attempt to ease frustrations and bring artistic training to the economically impoverished district.

Schulberg's third marriage, to actress Geraldine Brooks, ended with her death; they had no children. He is survived by his fourth wife, the former Betsy Ann Langman, and four of his five children: Victoria (by first wife, Virginia Ray, known as Jigee, who subsequently married Peter Viertel), Stephen and David (by second wife, Victoria; David was a Vietnam veteran who predeceased his father), Benn and Jessica (by fourth wife). His niece Sandra Schulberg was an executive producer of the Academy Award nominated film Quills, among other movies. His mother, of The Ad Schulberg Agency, served as his agent until her death in 1977. His brother, Stuart Schulberg, was a movie and television producer (David Brinkley's Journal, The Today Show). His sister, Sonya Schulberg (O'Sullivan) is an occasional writer (novel "They Cried a Little," and stories).

Budd Schulberg died in his home in Westhampton, New York, aged 95.