Terry Labonte started racing quarter-midgets when he was 7 and won a national championship at nine before moving onto the local short tracks in a stock car as a teenager. Driving on both dirt and asphalt, he won track championships in his hometown, in Houston, and in San Antonio from 1975 to 1977. During this time he also met Louisiana businessman Billy Hagan.
Labonte failed to return to victory lane over the next two years but did not finish outside the top-five in the final standings. He won his second career race in 1983 in the Budweiser Chevrolet. His team received sponsorship from Piedmont Airlines the following season, and he won races at Riverside International Raceway and Bristol Motor Speedway, clinching his first Winston Cup championship. He dropped to seventh in the final points in 1985. During that same season, he made his Busch Series debut at Charlotte in the #17 Pontiac owned by Darrell Waltrip and won the 400-mile race, the longest in Busch Series history. Waltrip asked Labonte to drive after deciding to focus his driving his priorities solely to Winston Cup racing during the middle of what would be Waltrip's 307-point gain over Bill Elliott in the final eight races of the 1985 season.
Labonte fell back to twelfth in the standings in 1986. Before season's end, he announced he was leaving Hagan's team to drive the #11 Budweiser Chevrolet for Junior Johnson's team the next year. In his first season with his new team, he earned four pole-position starts and won the Holly Farms 400, leaping up to third in the final standings. He followed that up with a fourth-place points finish in 1988. In 1989, the team switched to Ford Thunderbirds. Despite two wins during the season, he fell back to tenth in the championship.
In 1990 He signed with the #1 Skoal Classic Oldsmobile team for Precision Products Racing. He had four top-fives and nine top-tens but finished 15th in the points standings. He returned to Billy Hagan's team to drive his #94 Sunoco Oldsmobile in 1991, winning his first pole since 1988. He began 1992 with finishes inside the top 8 in each of the first eight races. He had a total of four top-five finishes and sixteen top-tens, ending the season eighth in points. The following season, the team switched to the #14 Kellogg's Chevrolet. While he had ten top-tens, for the first time in his career, Labonte failed to finish a race in the top-five and he dropped to eighteenth in points.
In 1994, Labonte joined Hendrick Motorsports, racing the #5 Kellogg's Chevrolet and responded by notching 3 wins in each of his first two years there. In 1996, he broke Richard Petty’s streak for consecutive races after winning at North Wilkesboro. Despite only two victories, Labonte went on to win the championship that year as well, a record-setting twelve years after his first. Driving with a broken hand during the last two races of the season, Labonte and his younger brother Bobby were able to perform a dual victory lap at Atlanta Motor Speedway in the last race of the year; Bobby won the race and Terry the championship on the final day of the season, the only time a driver and his sibling won the race and the championship at the same time.
Labonte posted twenty top-ten finishes in 1997 and notched his only win of the year at the fall race at Talladega Superspeedway. In 1998, Labonte was able to win the Pontiac Excitement 400 and finished ninth in points. Despite a win at his home track at Texas Motor Speedway and The Winston all-star race in 1999, Labonte finished 12th in the championship points, the first time he had finished outside the top-ten since 1993. The year 2000 saw Labonte's consecutive start streak broken at 655 after he suffered inner ear injuries at the Pepsi 400 and was forced to miss the Brickyard 400 and the Global Crossing @ The Glen. He began 2001 with two top-six finishes in the first seven races but finished 23rd in the final point standings. He dropped back to 24th in 2002.
Labonte began the 2006 season driving the #96 Texas Instruments/DLP HDTV Chevrolet Monte Carlo car for Hall of Fame Racing, a new team started by former Dallas Cowboys quarterbacks Roger Staubach and Troy Aikman. Labonte's past-champion's provisional guaranteed the team a starting spot in the first five races. Labonte's finishes in those races left the team in 30th place in points, sealing a spot for the team in each race as long as they remained in the top 35. Tony Raines took over the driving duties for the #96 car and ran the rest of the season's races, with the exception of the road-course races at Infineon Raceway, in Sonoma, California, and Watkins Glen International, in Watkins Glen, New York. Labonte's best finish of 2006 came at Infineon, where he finished 3rd due to a fuel mileage gamble by the crew chief of the #96 DLP/Texas Instruments Chevrolet, Philippe Lopez. Labonte also ran ten races with Hendrick Motorsports research & devolpment car in 2006.
During the 2007 season, Labonte drove three races for Michael Waltrip Racing, both road course events, and the Allstate 400 at the Brickyard, in the 55 NAPA Auto Parts Toyota Camry.
On May 11, 2008 it was announced that Labonte would drive the #45 car of Petty Enterprises for six races in the middle of the 2008 Sprint Cup season, replacing Kyle Petty on a temporary basis. Labonte was reunited with brother Bobby, who is the regular driver of the #43 for Petty. Labonte posted two solid top-twenty runs in the 6-race tenure, a 16th at Daytona and a 17th at Infineon, both the best finishes for the 45 car this season. It was later announced that Terry would drive for Petty again in the Brickyard 400 and would also drive in place of Patrick Carpentier in the The American Red Cross Pennsylvania 500 as well as driving in the Centurion Boats at the Glen driving for a team to be announced at Pocono, expected to be Hall of Fame Racing, a team Labonte had driven in at the road course races in 2006. Terry Labonte was back in the # 45 car for Petty Enterprises when the Sprint Cup Series went to the Michigan International Speedway for the 3M Performance 400 on August 17, 2008. Terry Labonte would be back in the # 45 car again for the AMP Energy 500 at the Talladega Superspeedway for the final time in the 2008 Sprint Cup Season.
NASCAR wanted a driver they were assured would not race in the NAPA Auto Parts 200, and were concerned Childress drivers Jeff Burton or Kevin Harvick would race in the event.
Labonte was the Sports Marshal for the 80th Annual Shenandoah Apple Blossom Festival in Winchester, Virginia from May 1 to May 8, 2007.