In 1932, Thompson's family moved to Chicago where he went to a public high school. He graduated from Indiana University with a B.A. in business and served in the United States Air Force from 1941 to 1946. He obtained a master's degree in journalism and worked half a year as an editor for the Chicago Journal of Commerce before taking a position as a journalism teacher at the University of Wisconsin. From 1950 to 1954, he worked on his final degree, a Ph.D. in sociology from the University of North Carolina at Chapel Hill.
From there, he moved to Cornell University to teach at the School of Business and Public Administration. He helped found the Administrative Science Quarterly, of which he was the first editor, in 1956. He became the director of the Administrative Science Center at the University of Pittsburgh. In 1967, he published Organizations in Action: Social Science Bases of Administrative Theory, one of the most influential books on organizations.