Olasky was born in Malden, Massachusetts, United States, to a Russian-Jewish family. He graduated from Newton High School (now Newton North High School) in 1968 and from Yale University in 1971 with a B.A. in American studies. In 1976 he earned his Ph.D. in American Culture at the University of Michigan. He became an atheist in adolescence and a Marxist in college, ultimately joining the Communist Party USA in 1972. He married and divorced during this period and by his own admission broke every one of the ten commandments except the one against murder. He left the Communist Party late in 1973 and in 1976 became a Christian after reading the New Testament and a number of Christian authors.
Olasky was a professor at the University of Texas at Austin from 1983 to 2007 and provost of The King's College in New York City from 2007 to 2011. He is now dean at the World Journalism Institute and a senior fellow at the Acton Institute. He joined World Magazine in 1990 and became its editor in 1994 and its editor-in-chief in 2001. Earlier, he was a reporter at the Boston Globe and a speechwriter at the Du Pont Company. Since 1996 he has been a ruling elder within the Presbyterian Church in America.
Olasky became provost of The King's College in June 2007. On November 5, 2010, the college announced his resignation, saying he would "devote more time to his role as editor-in-chief of World magazine." In an online article at Christianity Today about the announcement, Olasky suggested the move was related to the recent hiring of Dinesh D'Souza as the college's president: "'It will come as no surprise to you that Dinesh D'Souza and I have different ideas about some things," [Olasky] said in an e-mail to Christianity Today. 'I'd like to leave it at that and not do an interview.' In a blog post, WORLD publisher Nick Eicher said "there are no hard feelings" between Olasky and The King's College.
On August 22, 2011, Patrick Henry College announced Olasky's appointment to its newly created distinguished chair in journalism and public policy beginning in the fall semester of 2011.
Olasky has chaired the boards of City School of Austin and the Austin Crisis Pregnancy Center. His writings have been translated into Chinese, Spanish, Italian, French, Portuguese, Russian, and other languages, and he has lectured and given interviews on six continents. He has been a foster parent, a PTA president, a cross-country bicycle rider, a Little League assistant coach, and a visitor to 68 countries and 78 Major League and spring training ballparks.
Olasky’s most famous book is The Tragedy of American Compassion, which in 1995 Newt Gingrich distributed to incoming Republican representatives of the 104th Congress. The book, an overview of poverty-fighting in America from colonial times to the 1990s, argues that private individuals and organizations, particularly Christian churches, have a responsibility to care for the poor, and contends that challenging personal and spiritual help, common until the 1930s, was more effective than the government welfare programs of recent decades. Olasky argues that government programs are ineffective because they are disconnected from the poor, while private charity has the power to change lives because it allows for a personal connection between giver and recipient.
The book eventually helped to define "compassionate conservatism" in relation to welfare and social policy. In 1995, Olasky became an occasional advisor to Texas gubernatorial candidate George W. Bush. Bush made faith-based programs a major component of his 2000 presidential campaign, and Olasky's academic work helped form the basis for Bush's "compassionate conservatism." In 2001 and thereafter Olasky and WORLD criticized the Bush administration for not following through on school choice or on ideas for tax credits to encourage more individual giving to poverty-fighting groups.  In an interview with Mike Huckabee on October 10, 2009, Olasky denied that the Bush administration had implemented compassionate conservatism, remarking that "it was never tried."
In the late 1980s and early 1990s, Olasky edited the 16-book Turning Point: A Christian Worldview Declaration series with Herbert Schlossberg, director of Howard Ahmanson, Jr.'s Fieldstead Institute, which privately funded the series. Ahmanson has funded four of Olasky's 27 books, and Michelle Goldberg, author of the book Kingdom Coming: The Rise of Christian Nationalism, places Olasky in a crucial role in the Christian reconstructionism and dominionism movements, saying "I’m not sure whether he actually identifies himself as a Christian reconstructionist, but he’s very close to Christian reconstructionism." Olasky has described himself as a Christian who believes in God's sovereignty and man's liberty.
Olasky diverges from the mainstream of journalistic theory. He argues in his 1996 book Telling the Truth that God created the world, knows more about it than anyone else, and explains its nature in the Bible, so "biblical objectivity" accurately depicts the world as it is, whereas conventional journalistic objectivity shows either a blind materialism or a balancing of subjectivities. He has emphasized the Christian origins of freedom of the press and investigative journalism.
Olasky was prominent in the 1995-1996 welfare reform debate and came under attack when he contrasted George W. Bush's first presidential campaign in 2000 with that of John McCain:
"It would be pushing it too far to talk of the religion of Zeus trumping the religion of Christ. McCain’s no polytheist. But a lot of liberal journalists have holes in their souls. Some of them grew up in nominally Christian homes but never really heard the Gospel; now they are looking for purpose in their lives but have no understanding of God’s grace. Others know more but don’t want to repent. So, McCain’s emphasis on the classical virtues gives them a post-Clinton glow without pushing them to confront their own lives."
Jonah Goldberg, who took exception to Olasky's descriptions of both candidates, nonetheless recognized what Olasky was trying to say:
The Zeus reference seems to be derived from the ending of Tom Wolfe’s novel, A Man in Full
, in which two of the characters decide to convert to Zeus worship. And what Olasky meant by it was that McCain supporters generally, and Brooks specifically, are attracted to "Zeus-like strength" rather than Christ-like compassion. McCain is all about honor and duty and Bush is about charity and love. Zeus versus Christ. There you have it.
In her 2004 book Bushwomen, Laura Flanders writes, "Olasky is not a fan of high-achieving women. Women joining the workforce have had 'dire consequences for society,' he told a Christian magazine in 1998.” Olasky later said in response to this book that he was actually praising the high achievements of women in major philanthropic organizations: “From my study of the history of poverty-fighting in America, I found that it was basically women who ran the charitable enterprises. Men were involved, but it was essentially women who had the time to volunteer.”Corporate Public Relations: A New Historical Perspective (1987)
Turning Point: A Christian Worldview Declaration (1987, with Herbert Schlossberg)
Patterns of Corporate Philanthropy: Public Affairs Giving and the Forbes 100 (1987, foreword by Donald Rumsfeld)
Freedom, Justice and Hope: Toward a Strategy for the Poor and the Oppressed (1988, with Clark Pinnock, Herbert Schlossberg, and Pierre Berthoud)
Prodigal Press: The Anti-Christian Bias of American News Media (1988)
The Press and Abortion, 1838–1988 (1988)
Central Ideas in the Development of American Journalism (1991)
Patterns of Corporate Philanthropy: Funding False Compassion (1991, with Daniel T. Oliver and Robert V. Pambianco)
More Than Kindness: A Compassionate Approach to Crisis Childbearing (1992, with Susan Olasky)
The Tragedy of American Compassion (1992, republished in 1995)
Abortion Rites: A Social History of Abortion in America (1992)
Patterns of Corporate Philanthropy: The Progressive Deception (1992, with Daniel T. Oliver and Stuart Nolan)
Philanthropically Correct: The Story of the Council on Foundations (1993)
Fighting for Liberty and Virtue: Political and Cultural Wars in Eighteenth-Century America (1995)
Telling the Truth: How to Revitalize Christian Journalism (1996)
Renewing American Compassion: How Compassion for the Needy Can Turn Ordinary Citizens into Heroes (1996)
Whirled Views: Tracking Today's Culture Storms (1997, with Joel Belz)
The American Leadership Tradition: Moral Vision from Washington to Clinton (1999)
Compassionate Conservatism: What it is, What it Does, and How it Can Transform America (2000, introduction by George W. Bush)
Standing for Christ in a Modern Babylon (2003)
The Religions Next Door: What We Need To Know About Judaism, Hinduism, Buddhism, And Islam - and What Reporters Are Missing (2004)
Monkey Business (2005, with John Perry)
Scimitar's Edge (2006)
The Politics of Disaster: Katrina, Big Government, and A New Strategy for Future Crises (2006)
Unmerited Mercy: A Memoir, 1968-1996 (2010)
Echoes of Eden (2011)
2048, A Story of America’s Future (2011)