McDermott was the spearhead of the Australian attack in the late 1980s and early 1990s. He was powerfully built at 191 cm tall. He started his career with Queensland in 1983–84 and made his Test match debut for Australia in 1984–85 whilst still 19 v West Indies (his youth engendering his nickname "Billy" – from Billy the Kid). In his first Ashes tour of 1985, he took 30 wickets. But he was over-bowled and was burnt out. He had an excellent World Cup in 1987, helping Australia win the trophy. He took 18 wickets in the tournament, including 5/44 in the semi-final win over Pakistan.
McDermott was a rhythm bowler. When his rhythm was right, he would have an aggressive approach to the wicket and an excellent sideways-on action, giving him sharp pace and outswing. He always saved his best for England, taking 32 wickets in the last full series that he was able to play before injuries took over. Injuries seemed to hit him at wrong times, and he missed the history-making West Indies tour of 1995, and most of the 1996 World Cup. He also missed most of the 1993 Ashes tour when Shane Warne and Merv Hughes shared the spoils in his absence. His best bowling analysis in Tests is 8/97 against England in 1991. He ended with 291 wickets from 70 Tests and 203 one-day wickets with the best analysis being the 5/44.
In batting, even though McDermott's average was that of a tail-ender, he could still hit the ball with power and could stand his ground against fast bowling. In fact, two of the closest Tests that Australia lost, McDermott played a key role – In 1993, Australia lost the pivotal closest match in Test history by 1 run to West Indies when McDermott, on 18 and batting with stout resistance, was given out controversially when attempting to play a bouncer from Courtney Walsh. In 1994, he was on 29 not out in the Test against South Africa that Australia lost by 5 runs in chasing 117.
On 12 May 2011, it was announced that McDermott had been appointed the new bowling coach for the Australian cricket team replacing Troy Cooley. On 11 May 2012, McDermott announced his resignation as Australia's bowling coach, citing the heavy touring schedule as the reason. Craig McDermott has been appointed as the new bowling coach and consultant for Ireland cricket team. In November 2012, he announced that he would be opening a fast-bowling clinic.
McDermott returned to a coaching role with the Australian cricket team on a two-year contract in May 2014.
McDermott's sons, Alister McDermott and Ben McDermott are cricketers for Queensland.
In September 2006, McDermott was caught up in a sex-tape extortion case where he was blackmailed for $65,000 by 38-year-old former employee Peter Josef Vigan in exchange for two sexually explicit videos of McDermott with his wife. Vigan was charged by Queensland Police with eight counts of extortion and one count each of burglary and theft in relation to the earlier theft of the tapes from McDermott's luxury cruiser. He was released on bail at Southport Magistrates Court, and ordered to report to police three times a week and was due to reappear in court in December 2006. Both of the tapes and $30,000 of the money have been since recovered by police; Vigan spent the remainder of the money on the drug ice and throwing wild parties.
On 23 January 2009, Vigan pleaded guilty to the charges in Southport District Court; Judge Julie Dick sentenced him to 4½ years imprisonment with a non-parole period of 18 months, also ordering him to pay McDermott restitution of $35,000.
On 6 June 2008, the courts appointed a liquidator to McDermott's company, Maxen Developments. The company was wound up over failure to pay $48,000 owed to the Metropolitan Fire & Emergency Services Board. McDermott/Maxen allegedly owed more than $40,000,000, including $22,000,000 to Bridgecorp, $10,000,000 to City Pacific and $121,000 to architect Lachlan Henderson, while former delivery driver Terrence O'Brien and his wife Janice alleged that McDermott used $625,000 that was invested in the company for "personal purposes". On 12 June, Craig McDermott filed for bankruptcy.
Cricket legend Allan Border and Brisbane Broncos identity Barry Maranta, along with Rod Petricevic of Bridgecorp, have all been associated with McDermott either as directors of Maxen or directors of other entities related to Maxen and its projects at Bargara Beach Estate near Bundaberg and Fraser Waters at Hervey Bay.
In September 2007, it was revealed that McDermott's second wife, Suzie Houston, intended to sue him for allegedly refusing to pay child support.
In 2008, it was reported that Craig McDermott drove a black Porsche Carrera and lived in a luxury 1092 cubic metre Gold Coast waterfront home (understood to be owned by McDermott's third wife Ann-Maree) which was put up for sale for offers over $10,000,000.