Salter was born James A. Horowitz, the son of a moderately wealthy entrepreneur. He entered West Point in 1942 (when class sizes were doubled and the curriculum shortened by war to three years) at the urging of his alumnus father, and graduated in 1945. He was known among classmates as "Horrible" Horowitz. He completed flight training during his first class year, with primary flight training at Pine Bluff, Arkansas, and advanced training at Stewart Field, New York. On a cross-country navigation flight in May 1945, his flight became scattered, and low on fuel, he mistook a railroad trestle for a runway, crashlanding into a house in Great Barrington, Massachusetts.

He served twelve years in the U.S. Air Force as a fighter pilot before leaving the military to pursue a writing career, a decision he found difficult because of his passion for flying. His works based on his Air Force experiences have a fatalistic tone: his protagonists, after struggling with conflicts between their reputations and self-perceptions, are killed in the performance of duties while inept antagonists within their own ranks soldier on. Salter paints a vivid and familiar picture for any military pilot who has survived aerial combat.

During the Korean War Horowitz was assigned to the 335th Fighter-Interceptor Squadron, 4th Fighter-Interceptor Wing, a renowned MiG-hunting unit. He flew more than 100 combat missions in the F-86 Sabre between February 12 and August 6, 1952, and was credited with a MiG-15 victory July 4, 1952. He used his Korean experience for his first novel, The Hunters (1956), which was made into a film starring Robert Mitchum in 1958. His 1961 novel The Arm of Flesh drew on his experiences flying with the 36th Fighter-Day Wing at Bitburg Air Base, Germany, between 1954 and 1957. An extensively revised version of the novel was reissued in 2000 as Cassada.

The movie version of The Hunters was honored with much acclaim for its powerful performances, moving plot, and realistic portrayal of the Korean conflict. Although an excellent adaptation for Hollywood, it was very different from the original novel, which dealt with the slow self-destruction of a 31-year-old fighter pilot, who was once thought to be a "hot shot" but who found nothing but frustration in his first combat experience while others around him achieved glory, some of it perhaps invented.

Widely regarded as one of the most artistic writers of modern American fiction, Salter himself is critical of his own work, having said that only his 1967 novel A Sport and a Pastime comes close to living up to his standards. Set in post-war France, A Sport and a Pastime is a piece of erotica involving an American student and a young French girl, told as flashbacks in the present tense by an unnamed narrator who barely knows the student and who himself yearns for the girl, and who freely admits that most of his narration is fantasy.

Salter's prose shows the apparent influence of both Ernest Hemingway and Henry Miller, but in interviews with his biographer, William Dowie, he states that he was most influenced by André Gide and Thomas Wolfe. His writing is often described by reviewers as "succinct" or "compressed", with short sentences and sentence fragments, and switching between 1st and 3rd persons, and in the present and past tenses. His dialogue is attributed only enough to keep clear who is speaking but otherwise allows the reader to draw inferences from tone and motivation.

His memoir Burning the Days uses this prose style to chronicle the impact his experiences at West Point, in the Air Force, and as a celebrity pseudo-expatriate in Europe had on the way he viewed his life-style changes. Although it appears to celebrate numerous episodes of adultery, Salter is in fact reflecting on what has transpired and the impressions of himself it has left, just as does his poignant reminiscence on the death of his daughter. A line from The Hunters expresses these feelings: "They knew nothing of the past and its holiness."

Salter published a collection of short stories, Dusk and Other Stories in 1988. The collection received the PEN/Faulkner Award. He was elected to The American Academy of Arts and Letters in 2000.