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Walsh served as an assistant coach for several college teams, including twelve seasons at the University of South Carolina, working with McGuire, who was the Gamecocks' head coach. He helped South Carolina to an undefeated ACC regular season in 1970, an ACC Tournament championship in 1971, and three consecutive Sweet 16 appearances from 1971 to 1973.
Walsh was hired as an assistant with the Denver Nuggets by Larry Brown in 1977. He became the head coach of the Nuggets in 1979 and held the position for a year and a half, being replaced with Doug Moe in 1980.
In 1984, he became an assistant with the Indiana Pacers. He later took a position as general manager with the Pacers, where in 1987 he made the then-controversial decision to select Reggie Miller in the NBA Draft over local hero Steve Alford of Indiana University. The decision later proved to be prescient, as Miller had a Hall of Fame NBA career whereas Alford was a bust in the pros. He was later promoted to the position of CEO and president and held that position until shortly before the end of the 2007–08 season. During his first tenure with the Pacers, the team reached the playoffs 17 times, the Eastern Conference Finals six times (1994, 1995, 1998, 1999, 2000, 2004), the NBA Finals once (2000), and were Central Division Champions four times. In 2001 with the Pacers, he was named the Bloomberg News Service NBA Top Basketball Executive. During his time as the president and CEO, he oversaw all operations of the Pacers Foundation, Indiana Fever (WNBA), and Conseco Fieldhouse.
On April 2, 2008, the New York Knicks announced that Walsh had agreed to become their president of basketball operations. Walsh immediately recognized the expensive long-term contracts the Knicks carried, and traded Jamal Crawford for Al Harrington. That same day, Walsh traded Mardy Collins and Zach Randolph for Cuttino Mobley and Tim Thomas. Though Mobley retired of a heart condition, his contract, as well as those of Harrington and Thomas, expired at the end of the 2009–2010 NBA season, decreasing the Knicks' payroll by $27 million and giving them enough cap space to sign anyone notable from the heralded free agent class of 2010 which included NBA players such as LeBron James, Dwyane Wade, Chris Bosh, Amar'e Stoudemire, and Joe Johnson.
Walsh's first major signing came on July 8, 2010, when he signed Amar'e Stoudemire to a five-year, $100 million contract. In the 2010–2011 season, Walsh made a multi-player trade with Denver involving star players Carmelo Anthony and Chauncey Billups coming to the Knicks in exchange for a few players, including Raymond Felton and Danilo Gallinari, and undisclosed amounts of cash.
On June 3, 2011, Walsh resigned as general manager, but remained with the team as a consultant.
On June 27, 2012, Walsh returned to the Pacers as President of Basketball Operations as Larry Bird stepped down. In 2013, Walsh helped the Pacers win the Central Division and reach the NBA Eastern Conference Finals, where the team lost to eventual NBA Champion Miami Heat.
On June 27, 2013, Bird returned to the Pacers as President of Basketball Operations; Walsh stepped down from his role as president and accepted a position as a consultant. Walsh still attends Pacers games, usually seated near Bird and team general manager Kevin Pritchard.