He was born in Cavalese in County of Tyrol (today located in Trentino, Italy).
In Rome, he befriended and fell under the influence of Anton Rafael Mengs, and copied the works of Pietro da Cortona, in whose style he produced two altar-pieces of St. Jules and St. Agnes for the cathedral of Brixen.
In 1772, he and Mengs were commissioned to decorate the Papyrus room in the Vatican Library with themes from classic Roman frescoes, including grotteschi and other painted ornament, Starting in 1780, he led a team of artists replicating on canvas the Vatican Loggia designed by Bramante and Raphael.
The commission had been communicated by Giacomo Quarenghi, the architect to Empress Catherine II of Russia.
In 1790-91, Unterberger also helped design the playful Fontana dei Cavalli Marini (fountain of the sea horses) and the architectural capriccio of a hemi-facade (simulated ruins) of the Temple of Faustina in the Borghese gardens.