Phillips was born in Fort Worth, Texas and attended The College of William and Mary in Williamsburg, Virginia and Texas Christian University in Fort Worth. Phillips was an actor prior to World War II. During the war, he served as a nose gunner in the United States Army Air Forces. He was shot down over Austria and captured by the Germans, but was somehow able to escape and make it back to Allied lines.
Phillips joined the CIA as a part-time agent in 1950 in Chile, where he owned and edited "The South Pacific Mail", an English-language newspaper that circulated throughout South America and several islands in the Pacific. He became a full-time operative in 1954, and operated a major psychological warfare campaign in Guatemala during the US coup and its aftermath. He rose through the ranks to intelligence officer, chief of station and eventually chief of Western hemisphere operations, serving primarily in Latin America, including Cuba, Mexico, and the Dominican Republic. Phillips retired from the agency in 1975 and founded the Association of Former Intelligence Officers in the same year.
While investigating Lee Harvey Oswald's possible ties to certain radical groups around the time of the assassination of President John F. Kennedy, the HSCA obtained statements from Alpha 66 founder Antonio Veciana that Oswald had met on several occasions with a CIA operative known as "Maurice Bishop". After one former CIA case officer (who had been assigned to the JM/WAVE station in Miami) stated to investigators that Phillips had been known to use the alias, the commission attempted to see if Veciana could identify Phillips as being "Bishop". Veciana insisted that he was not the same person and moreover that he had never met Phillips before either. Some committee members (and also lead investigator Gaeton Fonzi) doubted Veciana, reasoning that he should have at least recognized Phillips, a high-profile officer so heavily involved in Cuban operations.
In 2014, at a conference named The Warren Report and the JFK Assassination: Five Decades of Significant Disclosures, Veciana reversed his previous statements, asserting unequivocally that he believed that the agent he knew as Bishop had in fact been David Atlee Phillips.
In their 1980 book Death in Washington, authors Donald Freed and Fred Landis charged that the CIA was involved in the 1973 Chilean coup d'état and the 1976 assassination of Orlando Letelier. The authors specifically named Phillips as being involved in a cover-up of the assassination and reiterated Fonzi's claim that Phillips served as Oswald's case officer while using the alias "Maurice Bisop". In 1982, Freed, Landis, and their publisher were named in a $230 million libel suit by Phillips and the AFIO. A settlement was reached in 1976 with Phillips receiving a retraction and an unspecified amount of money. Phillips donated these proceeds to AFIO for the purpose of creating a legal defense fund for American intelligence officers who felt they were the victims of libel.
After the death of former CIA agent and Watergate figure E. Howard Hunt in 2007, Saint John Hunt and David Hunt revealed that their father had recorded several claims about himself and others being involved in a conspiracy to assassinate John F. Kennedy. In the April 5, 2007 issue of Rolling Stone, Saint John Hunt detailed a number of individuals implicated by his father including Phillips, as well as Lyndon B. Johnson, Cord Meyer, David Sánchez Morales, Frank Sturgis, William Harvey and an assassin he termed "French gunman grassy knoll" who many presume was Lucien Sarti. The two sons alleged that their father cut the information from his memoirs, "American Spy: My Secret History in the CIA, Watergate and Beyond", to avoid possible perjury charges. Hunt's widow and other children told the Los Angeles Times that the two sons took advantage of Hunt's loss of lucidity by coaching and exploiting him for financial gain. The newspaper said it examined the materials offered by the sons to support the story and found them to be "inconclusive."
Phillips wrote and lectured frequently on intelligence matters. He authored five books, including his CIA memoir The Night Watch, Careers in Secret Operations: How to Be a Federal Intelligence Officer, The Terror Brigade, The Carlos Contract, and The Great Texas Murder Trials: A Compelling Account of the Sensational T. Cullen Davis Case.
Phillips died at his home in Bethesda, Maryland from complications of cancer on July 7, 1988; at the age of 65.
In 1948, Phillips married Helen Hausman Haasch. They had four children, then divorced in 1967. In 1969, he married his second wife, Virginia Pederson Simmons, who had three children from a previous marriage. Together, the couple had one other child.