Keaggy began playing music professionally in the late 1960s with drummer John Sferra. The two longtime friends formed a band called Glass Harp. The band was signed to Decca Records and began to open for such artists as Iron Butterfly, Yes, Traffic and Chicago. At one point, guitarist Joe Walsh had considered joining the band.
Keaggy left Glass Harp in 1972, and released his first solo album the following year, entitled What A Day. Keaggy married his wife Bernadette the following summer. He then took a brief vacation from recording on his own and only toured in support of other artists, like 2nd Chapter of Acts, Paul Clark, and Nancy Honeytree. Keaggy returned in 1976 with Love Broke Thru, which included his cover of the Randy Stonehill/Keith Green/Todd Fishkind song of the same name. In 1978, Keaggy released his first critically acclaimed instrumental album entitled Master and the Musician.
The Keaggy family then moved to Kansas City, Missouri. Their first daughter, Alicia, was born soon after in March of 1980. Their second daughter, Olivia, was born on Valentine's Day, 1984, and in 1987, the Keaggys celebrated the birth of their son, Ian. Keaggy was signed to the Contemporary Christian music label Myrrh Records in the 1980s, where he released a string of albums including Town To Town, Ph'lip Side and Play Thru Me.
In 1988, Keaggy won his very first Dove Award for his second instrumental project, The Wind and the Wheat. Keaggy's second Dove Award came in 1992 for his Celtic-influenced, Beyond Nature. From 1998 to 2001, Keaggy has dominated the "Instrumental Record" category in the Dove Awards, winning awards for Invention, Acoustic Sketches, Majesty and Wonder, and Lights of Madrid.
In 1989, Keaggy teamed up with Randy Stonehill, Russ Taff, Derri Daugherty, Mark Heard, Steve Taylor and other musicians to create Phil Keaggy and Sunday's Child, a tribute of sorts to 1960s bands like The Beatles. A few years later, Keaggy would perform at former Beatle Paul McCartney's sister-in-law's wedding. After the wedding, Keaggy fulfilled a lifelong dream by jamming with McCartney in a hotel room.
In 1994, Keaggy released Crimson and Blue, a bluesy rock album that included a cover of Van Morisson's "When Will I Ever Learn to Live in God". That album was also remixed and reissued as Blue, with the added Badfinger cover "Baby Blue". Keaggy enlisted his old friend John Sferra of Glass Harp for the tour that followed. (The tour also featured Wade Jaynes from Chagall Guevara on bass and Phil Madeira on hammond organ.
To this day, Keaggy continues to record and tour heavily.
Rumors have followed Keaggy for years that Jimi Hendrix had supposedly named him as his answer to the question "who is the best guitarist in the world?" while making an appearance on the Tonight Show. Sometimes the rumor is that it was Eric Clapton, or that it was on the Dick Cavett show. Keaggy himself thinks that these rumors are probably not true, but due to the fact that many of these shows did not keep archives of all of their early shows, it is nearly impossible to either confirm or disprove the rumor completely. Some fans have claimed to have seen the show in question, but to date, no one has presented a tape or any kind of evidence to confirm it.