Yamauchi began language studies at the University of Hawaii but then transferred his candidacy to studying Biblical languages at Shelton College, Ringwood, New Jersey, and received his B.A. degree there. He then enrolled in Mediterranean studies for his M.A. degree at Brandeis University, and then pursued studies in Mandaean Gnostic texts as part of his Ph.D. dissertation at Brandeis University.

At Brandeis he studied under the late Cyrus H. Gordon, and expanded his linguistic studies in ancient near eastern languages, which included Hebrew, Aramaic, Akkadian, Ugaritic, Arabic, Syriac, and Coptic. In all he has immersed himself in 22 different languages. Yamauchi taught for a time at Shelton College, before becoming an Assistant Professor of history at Rutgers University. He then received his professorial appointment at Miami University.

Yamauchi's areas of expertise include: Ancient History, Old Testament, New Testament, Early Church History, Gnosticism, and Biblical Archaeology. He has been awarded eight fellowships, contributed chapters to several books, articles in reference works, and has published 80 essays in 37 scholarly journals. He has been a member and officer of the Institute for Biblical Research, an organization of scholars devoted to the research of the Bible.

Yamauchi has also contributed essays to various reference works in biblical studies and Christian history, and written commentaries on the books of Ezra and Nehemiah in the Expositor's Bible Commentary series that was edited by Frank Gaebelein. Yamauchi contributed the notes on Ezra and Nehemiah in the NIV Study Bible.

Other areas where Yamauchi has written include the social and cultural history of first century Christianity, the relevance of the discovery of the Dead Sea Scrolls for New Testament studies, the primary source value of Josephus' writings, and the role of the Magi in both ancient Persia and in the nativity narrative of the Gospel of Matthew. Yamauchi is written several books and essays on ancient gnosticism. He has been highly critical of scholars, such as Rudolf Bultmann, who have used third and fourth century AD Gnostic texts as primary evidence for the existence of pre-Christian gnosticism.

In the 1970s he was a prominent critic of the late Morton Smith's interpretation of an apocryphal text known as the Secret Gospel of Mark. Yamauchi revisited the corpus of Smith's writings on the topics of the lost gospels and Jesus as a magician-healer in his lengthy essay on magic and miracles (1986). Yamauchi faulted Smith's work on several points. One problem Yamauchi found was Smith's anachronistic use of third, fourth and fifth century AD Greek magical papyri sources in his reinterpretation of Christ as a magus-magician. He argued that Smith's "penchant for parallels with the life of Apollonius by Philostratus" was "historically anachronistic".

As a youth, Yamauchi was sent to an Episcopalian school. But, by 1952, he had begun to shift towards evangelicalism. In his senior high school year Yamauchi studied at a rural school and worked at a missionary farm known as the Christian Youth Center. He is a founding member of the Oxford Bible Fellowship church in Oxford, Ohio. He has been a supporter of the Inter Varsity Christian Fellowship throughout his career, and particularly at the campus of Miami University. He has contributed popular articles to periodicals like Christianity Today magazine on the resurrection of Christ and in response to controversial claims made about the Dead Sea Scrolls.

Yamauchi was featured in the widely read Christian apologetic work The Case for Christ by Lee Strobel. He has given presentations on the Easter story to such universities as Cornell, Yale, and Princeton. He has also appeared in various television documentaries concerning the life of Christ.