Kildall received his PhD in computer science from the University of Washington in 1972. While working as an instructor for the US Navy in Monterey, California, he created implementations of the PL/I programming language for the Intel 4004 and 8008 CPUs. He referred to these versions as PL/M, M for microcomputer.
In 1973, Kildall began work on a disk operating system in order to make PL/M a useful development environment, and ended up with CP/M. He founded Digital Research after his discharge from the Navy in 1976 and continued work on CP/M, which he originally sold in classified ads in the back pages of computer magazines. With the release of the Altair 8800 in January 1975 there was a commercial system capable of running CP/M, and before the end of the year a number of clones had appeared with disk drives that required it. By 1977, it was the most popular microcomputer operating system in existence, running on nearly every Intel 8080- and Zilog Z80-based computer.
In 1980, IBM approached Digital Research for a version of CP/M for its upcoming IBM PC. Legend has it that Kildall snubbed the IBM representatives by going flying in his airplane for several hours. Although widespread, the story is generally not accepted to be true because it was Kildall's wife, Dorothy, who handled business negotiations, not Kildall himself. Another story has it that Dorothy wanted the IBM executives to sign their standard non-disclosure agreement, which they considered to be an insult. One way or the other, IBM's decision to source its primary operating system from Microsoft was the beginning of the end of Digital Research's days as the world's largest manufacturer of software for microcomputers.
After CP/M, Kildall went on to create a variety of experimental projects, including an implementation of the Logo educational programming language and interfaces between computers and CD-ROM drives and videodisc players. He created a CD-ROM version of Grolier's Encyclopedia. He left Digital Research in 1991 when the company was sold to Novell, and moved to suburban Austin, Texas, keeping a second home in California. Friends and acquaintances reported he was bitter at how MS-DOS, which he considered a cheap knockoff of CP/M, made Bill Gates and Microsoft famous while he languished in obscurity.
He died in 1994 of uncertain causes in Monterey, California at the age of 52. Some reports suggest Kildall suffered a fall at the Franklin Street Bar and Grill in Monterey on July 8 and died of internal bleeding three days later.