After joining IBM Research in 1972, he built on the work of IBM's Rolf Landauer to show that general-purpose computation can be performed by a logically and thermodynamically reversible apparatus; and in 1982 he proposed a re-interpretation of Maxwell's demon, attributing its inability to break the second law to the thermodynamic cost of destroying, rather than acquiring, information.
In collaboration with Gilles Brassard of the Université de Montréal he developed a practical system of quantum cryptography, known as BB84, which allows secure communication between parties who share no secret information initially, based on the uncertainty principle. With the help of John Smolin, he built the world's first working demonstration of quantum cryptography in 1989.
His other research interests include algorithmic information theory, in which the concepts of information and randomness are developed in terms of the input/output relation of universal computers, and the analogous use of universal computers to define the intrinsic complexity or "logical depth" of a physical state as the time required by a universal computer to simulate the evolution of the state from a random initial state.
In 1993 Bennett and Brassard, in collaboration with others, discovered "quantum teleportation", an effect in which the complete information in an unknown quantum state is decomposed into purely classical information and purely non-classical Einstein-Podolsky-Rosen (EPR paradox) correlations, sent through two separate channels, and later reassembled in a new location to produce an exact replica of the original quantum state that was destroyed in the sending process.
In 1995-7, working with Smolin, Wootters, IBM's David DiVincenzo, and other collaborators, he introduced several techniques for faithful transmission of classical and quantum information through noisy channels, part of the larger and recently very active field of quantum information and computation theory. He is a Fellow of the American Physical Society and a member of the National Academy of Sciences.