Tone attended Cornell University, where he was President of the Dramatic Club and was elected to the Sphinx Head Society. He gave up the family business to pursue an acting career in the theatre. After graduating, he moved to Greenwich Village, New York, and got his first Broadway role in the 1929 Katharine Cornell production of The Age of Innocence.
The following year, he joined the Theatre Guild and played Curly in their production of Green Grow the Lilacs (later to become the famous musical Oklahoma!). He later became a founding member of the famed Group Theatre, together with Harold Clurman, Cheryl Crawford, Lee Strasberg, Stella Adler, Clifford Odets, and others, many of whom had worked with the Theatre Guild. Strasberg had been a castmate of Tone's in Green Grow the Lilacs. These were intense and productive years for him: among the productions of the Group he acted in were 1931 (1931) and Success Story (1932). Franchot Tone was universally regarded by the critics as one of the most promising actors of his generation. Gary Cooper called Tone the best actor he had ever worked with.
The same year, however, Tone was the first of the Group to turn his back on the theatre and go to Hollywood when MGM offered him a film contract. Nevertheless, he always considered cinema far inferior to the theatre and recalled his stage years with longing. He often sent financial support to the Group Theatre, which often needed it. He eventually returned to the stage from time to time after the 1940s. His screen debut was in the 1932 movie The Wiser Sex. He achieved fame in 1933, when he made seven movies that year, including Today We Live, written by William Faulkner, where he first met his future wife Joan Crawford, Bombshell, with Jean Harlow (with whom he co-starred in three other movies), and the smash hit Dancing Lady, again with Crawford and Clark Gable. In 1935, probably his best year, he starred in Mutiny on the Bounty (for which he was nominated for the Academy Award for Best Actor), The Lives of a Bengal Lancer and Dangerous opposite Bette Davis, with whom he was rumored to have had an affair.
He worked steadily through the 1940s without breaking through as a major star. He was beginning to be type-cast as the wealthy cafe-society playboy and very few of the films of this period are notable. One conspicuous exception was Five Graves to Cairo (1943), the third film by the young Billy Wilder, a World War II espionage story, starring Tone, Anne Baxter, Akim Tamiroff and Erich von Stroheim as German Field Marshal Erwin Rommel.
In the 1950s, he moved to television and returned to Broadway. In 1957, he appeared on Broadway in A Moon for the Misbegotten with Wendy Hiller. He co-starred in the Ben Casey medical series from 1965 to 1966 as Casey's supervisor. He also starred in, directed, and produced his first film, an adaptation of Anton Chekhov's Uncle Vanya (1957) with then wife Dolores Dorn. He appeared as a disheartened traveling pereacher named "Malachi Hobart" in an early episode of NBC's Wagon Train.
He married and divorced three more times: to fashion model turned actress Jean Wallace (1941–48, with whom he had two sons), actress Barbara Payton (1951–52), and finally to the much younger actress Dolores Dorn (1956–59).
Franchot Tone has a star on the Hollywood Walk of Fame at 6558 Hollywood Blvd.