Paxson attended Archbishop Alter High School in Kettering, Ohio, following in the footsteps of his elder brother, Jim, who would go on to a star career at the University of Dayton, and, later, in the NBA, as a member of the Portland Trail Blazers.

By his senior year, John was considered one of the top guards in the country and was named to the 1979 McDonald's All-American Team, joining such future college and NBA standouts as Isiah Thomas, James Worthy, and Byron Scott in the game.

The following year, Paxson led Notre Dame to a 19–10 record, averaging a career-high 17.7 points per game and tallying 112 assists en route to claiming his second All-America selection.

Bob Arnzen, Pat Garrity, Tim Abromaitis and Paxson are the only four basketball players in Notre Dame's history to earn Academic All-America accolades more than once.

On June 6, 2005, Paxson was inducted into the College Sports Information Directors of America Academic All-America (CoSIDA) Hall of Fame, along with five other celebrities.

The Bulls won the title that year, fueled by Michael Jordan's return and the addition of another eventual Hall of Famer, Dennis Rodman.

Paxson resigned shortly after the season to join Neil Funk on radio broadcasts, saying "I knew full well the time commitment coaching takes.

However, the Bulls opened the 2003–04 NBA season in sloppy and uninspired form, and Paxson opted to begin reshaping the character of the team by trading leading scorer Jalen Rose for Antonio Davis and firing friend and former teammate coach Bill Cartwright, replacing him with Scott Skiles.

Kirk Hinrich made the NBA All-Rookie Team in 2003–04, and the 2004–05 rookie class yielded four major contributors, Ben Gordon, Luol Deng, Chris Duhon and Andrés Nocioni.

After a long drought dating back to Jordan's departure, the Bulls returned to the playoffs and posted the third-best record in the Eastern Conference, a 24-game improvement from the previous year.

The absence of starting center and leading scorer Eddy Curry and promising small forward Luol Deng in this series played a major role, although Tyson Chandler and Kirk Hinrich both performed well.

Deng rewarded his general manager's loyalty by playing dominating basketball in the Bulls' first-round playoff sweep of the defending champion Heat in April 2007.

In June 2008, Paxson named former NBA player and scout Vinny Del Negro head coach,[3] but their relationship eventually went sour.

Multiple reports surfaced that on March 30, 2010, Paxson and Del Negro got into a physical altercation[4] over the minutes of Bulls center Joakim Noah, who was recovering from a foot injury.