After recording his own 1972 debut, The B-52 Band & the Fabulous Skylarks, Burnett toured with Delaney & Bonnie before befriending Bob Neuwirth, a singer/songwriter known for his ties to Bob Dylan. Three years later, Dylan invited Burnett to play guitar on his Rolling Thunder Revue tour. After the Revue concluded, he and fellow Rolling Thunder alumni Dave Mansfield and Steve Soles founded the Alpha Band, releasing their eponymous debut in 1977. Spark in the Dark followed later that year, and like its predecessor failed to find commercial favor; when 1978's Statue Makers of Hollywood met a similar fate, the Alpha Band split, and Burnett returned to his solo career. He resurfaced in 1980 with the acclaimed Truth Decay, which, like all of his solo work, found its lyrical center in his spiritual concerns. A move to Warner Bros. followed for 1982's Trap Door EP, and 1983's full-length Proof Through the Night featured guests Pete Townshend, Ry Cooder, and Richard Thompson. Still, commercial success eluded him, and so he continued working as a producer, overseeing highly regarded records like Los Lobos' How Will the Wolf Survive?, Marshall Crenshaw's Downtown, and the BoDeans' Love & Hope & Sex & Dreams.

After recording a self-titled 1986 solo effort, Burnett agreed to produce The Turning, an album for the successful Christian pop singer Leslie Phillips. The album won wide acclaim even from secular outposts, but it was to be Phillips' last overtly religious release; instead, she began performing under her nickname, Sam, and with Burnett's aid, landed a deal with the Virgin label for 1987's acclaimed The Indescribable Wow. Prior to recording her 1991 LP, Cruel Intentions, Phillips and Burnett wed, and he remained in the producer's seat for her later efforts, including 1994's Martinis & Bikinis and 1996's Omnipop. Despite his additional success manning albums like Elvis Costello's masterful 1986 effort King of America as well as producing the star-studded 1987 Roy Orbison tribute Black & White Night, Burnett continued his solo career; like earlier efforts, 1988's The Talking Animals won raves from the press but failed to find an audience outside of his devoted cult following. His output dwindled as his production work increased, and only in 1992 did he release a follow-up, the Spartan Criminal Under My Own Hat. Instead, Burnett remained one of the most prolific and distinctive producers of his day, crafting successes like Costello's Spike, Counting Crows' August and Everything After, the Wallflowers' Bringing Down the Horse, and Gillian Welch's Revival.

Burnett's public profile took a huge leap in 2001 when he served as composer and music producer for the Coen Brothers' film O Brother, Where Art Thou? as well as producing the soundtrack album from the film, which became somewhat of a cultural phenomenon, selling close to nine million copies and earning Burnett four Grammys. He partnered with the Coen Brothers to form DMZ Records in 2002, and the label released several soundtrack albums either produced or executive produced by Burnett, including Cold Mountain, A Mighty Wind, Crossing Jordan, and The Ladykillers. Burnett finally released an album of new original material, The True False Identity, in 2006 on Sony, which that same year also released a 40-song retrospective set spanning Burnett's entire career, Twenty Twenty: The Essential T-Bone Burnett. Tooth of Crime followed in 2008 on Nonesuch Records.

Burnett remained an in-demand producer over the next few years, working with old friends (he helmed Costello's Secret, Profane & Sugarcane), up and coming artists (Grace Potter & the Nocturnals), and classic veterans (Willie Nelson, Gregg Allman), earning perhaps his greatest attention for The Union, a 2010 collaboration between Elton John and Leon Russell, and his music supervision on the Academy Award-winning 2009 film Crazy Heart. Burnett also produced the soundtrack for the 2012 adaptation of Suzanne Collins' The Hunger Games and collaborated with the Civil Wars for the soundtrack for the 2013 food documentary A Place at the Table.