Stephen Kendall Gadd was born on April 9, 1945, in Irondequoit, New York, a suburb of Rochester, and grew up in the Rochester area. A drummer uncle encouraged him, his family added a snare drum, a small bass drum and then a tom-tom and hi-hat on successive birthdays, and records his uncle bought, by Gene Krupa and Louie Bellson, led him on to Philly Joe Jones. At eleven he won a place on the Mickey Mouse National Talent Round-Up, which sent him to California to play drums and tap dance on The Mickey Mouse Club and meet Walt Disney. Rochester's clubs brought in touring jazz players and organ groups, and he has said he was sometimes allowed to sit in with the organ bands, including Jack McDuff's. He also played with the Rochester flugelhorn player Chuck Mangione.

Gadd studied at the Eastman School of Music, graduating in 1968, working on timpani, marimba and orchestral percussion before deciding the drum set was the instrument he played best. His first studio recording came that year on Gap Mangione's Diana in the Autumn Wind, with Chuck Mangione writing and conducting. He was then drafted and spent three years in the United States Army Field Band at Fort Meade, Maryland. Back in Rochester he worked with a big band, and in 1972 he formed a trio with bassist Tony Levin and Mike Holmes that relocated to New York City. The trio did not last, but his studio work there took off.

In 1973 Gadd was a member of L'Image, a short-lived fusion band with vibraphonist Mike Mainieri, pianist Warren Bernhardt, guitarist David Spinozza and Levin, and he began playing on records for the CTI label, backing Milt Jackson, Chet Baker, Art Farmer, Jim Hall and Hubert Laws. By the middle of the decade he was one of the most sought-after drummers in New York. His sessions of those years included Paul Simon's Still Crazy After All These Years (1975), whose "50 Ways to Leave Your Lover" carries his reworked verse groove, Herbie Mann's Discothèque (1975), and Chick Corea's The Leprechaun and My Spanish Heart (both 1976). Also in 1976 he became a member of Stuff, the band of New York session players built around bassist Gordon Edwards, guitarists Eric Gale and Cornell Dupree, and keyboardist Richard Tee, which shared its drum chair between Gadd and Chris Parker on its first album for Warner Bros. In 1977 he played the extended drum solo on Steely Dan's "Aja," alongside a Wayne Shorter tenor saxophone solo; the solo was built from two takes.

Through the early 1980s Gadd was a founding member of Steps, formed in New York in 1979 around Mainieri, Michael Brecker, pianist Don Grolnick and bassist Eddie Gómez, and recorded with them in Tokyo in December 1980. He played on Corea's Three Quartets (1981) and on the 1981 Simon and Garfunkel Concert in Central Park. From 1983 to 1987 he was drummer in the Manhattan Jazz Quintet, a group formed at the suggestion of a Japanese jazz magazine and the King label, and he returned for a reunion in 1990. He led his own sessions with Gaddabout (1984), then The Gadd Gang, with Gómez, Dupree, Tee and baritone saxophonist Ronnie Cuber, which made The Gadd Gang (1986), Here & Now (1988) and Live at the Bottom Line (1994). In 1989 he reunited with Chuck and Gap Mangione, Joe Romano and Frank Pullara for The Boys from Rochester.

In 1991 Gadd toured the world with Paul Simon, and from the mid-1990s he recorded and toured with Eric Clapton, in 1994 and 1996 and again from 1997 to 2004. In 1997 he toured with the French pianist Michel Petrucciani and bassist Anthony Jackson, a tour captured on Trio in Tokyo (recorded at the Blue Note Tokyo in November 1997, released in 1999). He was named to the Modern Drummer Hall of Fame in 1984 and received an honorary doctorate from Berklee College of Music in 2005. In 2005 he played the Super Trio concert with Corea and bassist Christian McBride, and in 2009 L'Image reunited for L'Image 2.0. Since 2014 he has also played in Blicher Hemmer Gadd, a soul-jazz trio with Danish saxophonist Michael Blicher and organist Dan Hemmer.

His own band, the Steve Gadd Band, with guitarist Michael Landau, keyboardist Larry Goldings, bassist Jimmy Johnson and trumpeter Walt Fowler, recorded Gadditude (2013) and 70 Strong (2015) and the live Way Back Home, taped at the Rochester International Jazz Festival on June 25, 2015, which earned a Grammy nomination for Best Contemporary Instrumental Album. Steve Gadd Band (2018), with Kevin Hays on keyboards, won that Grammy at the 2019 ceremony, and At Blue Note Tokyo (2021) was nominated in 2022. He co-led a band with Corea, recording Chinese Butterfly (2017) with saxophonist Steve Wilson, guitarist Lionel Loueke, bassist Carlitos Del Puerto and percussionist Luisito Quintero. Eastman gave him an honorary doctorate on October 13, 2017. Hudson Music published his rudiments book Gaddiments in 2021 and the career retrospective GADD: A Life in Time in 2023. In early 2022 he recorded Center Stage with Gómez, Cuber and the WDR Big Band. Gadd turned 81 in April 2026, and his official website's news page, as of September 2026, lists him back on tour with James Taylor, while its 2026 touring list also names Blicher Hemmer Gadd, Love Rocks NYC, the keyboardist Simon Oslender and Paul Simon.

Gadd is widely regarded as one of the most influential drummers of his generation: a light, orchestral touch, precise time and a habit of building a part around the song rather than around the drums, with roots in the drum-corps rudiments he studied in school (his 2021 book Gaddiments is about rudiments). His influences include Buddy Rich, Elvin Jones and Tony Williams, and he has cited Rick Marotta's less-is-more approach. Corea said he brought orchestral and compositional thinking to the kit while still swinging, and the "Aja" solo, which JazzTimes writer Nate Chinen placed among his five best tracks in 2013, is the best-known example. Much of his fame rests on pop and rock sessions, from Paul Simon and Steely Dan to Eric Clapton and James Taylor; his own records and bands, from Stuff and Steps through The Gadd Gang, the Manhattan Jazz Quintet and the Steve Gadd Band, are jazz, fusion and soul-jazz, and he is listed in the New Grove Dictionary of Jazz. His grooves, among them the verse figure on "50 Ways to Leave Your Lover," have been transcribed in instructional books and videos, and he has been a Yamaha endorser since the mid-1970s.