After spending five years as a player for the San Antonio Spurs, he became an assistant with the team before being appointed as a head coach in 1980 with the Montana Golden Nuggets of the Continental Basketball Association (CBA).

The success did not carry over to the next season, and Karl was dismissed by the Cavaliers in mid-March after a disappointing 25–42 start;[5][6] Cleveland finished 4–11 under assistant Gene Littles to end up at 29–53 (.354).

During the 1987–88 season, the Warriors got off to a rough start, and team management decided to trade Purvis Short, Sleepy Floyd and Joe Barry Carroll in order to save money and get younger.

In his second (and first full) season as the SuperSonics coach in 1992–93, the team improved their 47–35 record to 55–27, and qualified for the playoffs as the third seed in the Western Conference.

Despite a rift with mid-season acquisition Kendall Gill,[20] Karl led the Sonics to the top seed in the Western Conference.

Led by All-Stars Shawn Kemp and Gary Payton, the latter named Defensive Player of the Year, the SuperSonics defeated the Sacramento Kings three games to one in the first round, and then swept the two-time reigning champions Houston Rockets to advance to the Western Conference Finals.

Seattle was out-matched by Michael Jordan's scoring, Dennis Rodman's rebounding and the Bulls' team defense, and quickly found themselves in a 0–3 deficit and facing a sweep.

The back-to-back second round playoff exits and his deteriorating relationship with general manager Wally Walker[24] led to Karl's eventual dismissal in late May, two weeks after their elimination.

On August 30, 1998, Karl was named head coach of the Milwaukee Bucks, lured by a particularly lucrative contract offer.

In his third season, Karl guided the Bucks, led by a "Big Three" of Glenn Robinson, Ray Allen and Sam Cassell to their first division championship in 15 years, which culminated with an appearance in the 2001 Eastern Conference Finals, where they lost in seven games.

In Karl's fourth season, the Bucks entered with high expectations; however, they finished in ninth place in the conference and missed the playoffs.

Seeded first in the conference at the all-star break, the Bucks collapsed and were eliminated from the playoffs in the final regular season game.

[31] Though Payton and Karl had success together in Seattle and the move allowed more minutes for Michael Redd, it made Cassell the odd man out[32] and broke up a core that was within one game of the NBA Finals just two years prior.

Karl pushed for the team to draft point guard T. J. Ford, making Cassell expendable and he was traded to Minnesota.

[39] Karl made an immediate impact on the Nuggets, taking a team floundering at 17–25 and 4-16 in the last 20 games before his appointment to a 32–8 record in the second half of the 2004–05 season to finish 49–33.

[41] Karl was criticized for his role in the Knicks–Nuggets brawl on December 16, 2006, allegedly trying to run up the score and humiliate Isiah Thomas by keeping his starting players in the final minutes of a blowout win.

During the 2008–09 season, the Nuggets, led by Karl, Carmelo Anthony, and the newly acquired Chauncey Billups tied a franchise-best 54 wins and entered the playoffs as the Western Conference's #2 seed.

[45] Karl coached the Western Conference All–Stars at the 2010 NBA All-Star Game on February 14 at Cowboys Stadium in Arlington, Texas.

After the 2010 NBA All-Star Game, it was revealed in a press conference that Karl was diagnosed with treatable neck and throat cancer.

[50][51] During the season, Carmelo Anthony requested and was granted a trade to New York, and Karl was now coaching a considerably younger and less experienced team.

They pushed their first–round playoff series against the Lakers to seven games, but were defeated The newly acquired Andre Iguodala immediately helped the team's defense, and the Nuggets finished with their best record since joining the NBA in 1977, at 57–25.

[54][55] The Nuggets and Karl's historic season came to a disappointing end with a first-round playoff loss to the Golden State Warriors in six games.

[56] The series was noted for its controversy, with Warriors coach Mark Jackson admitting he had "inside information" on Denver's playing style.

[57] Karl alleged Iguodala was the "mole" for the Warriors, which fueled speculation when he agreed to a four–year contract with Golden State following the playoff loss.

[55][62] On February 12, 2015, after several weeks of talks and speculation, Karl agreed to a deal to become the head coach of the Sacramento Kings, after signing a four-year, $15 million contract.