Walker was born in Boston, Massachusetts, in 1840. He graduated from Amherst in 1860, and was studying to join the bar when the Civil War began. He enlisted as a sergeant major, but was quickly promoted, eventually becoming a brigadier general. Because of this, many contemporaries and historians refer to him as "General Walker."

In 1869 he became chief of the Bureau of Statistics at the Treasury Department. The secretary of the interior appointed him as superintendent of the ninth census in 1870. In 1871, he was appointed commissioner of Indian affairs, although he also continued to serve as superintendent of the census without remuneration. He resigned both posts in December 1872 to become professor of political economy and history at Yale. He was appointed superintendent of the tenth census in 1879, but resigned about a year later to become president of the Massachusetts Institute of Technology, a post he held until his death in 1897. Walker was one of the preeminent economic voices of his day, especially in regard to wage and labor theory.

A prolific author of texts on economics, he also was president of the American Statistical Association (1882-97), the first president of the American Economics Association (1885-92), and served as vice-president of the National Academy of Sciences (1891-97).