Spencer began racing at the age of four, competing in dirt track events near Shreveport. After winning the 1978 250cc U.S. National Novice Class Road Racing Championship, he joined the American Honda racing team in the AMA Superbike Championship, delivering Honda their first-ever Superbike victory at Road America in the 1980 AMA season. He gained international prominence the same year at the Transatlantic Trophy match races, winning two legs at Brands Hatch and defeating established World Champions Kenny Roberts and Barry Sheene. He finished third in the 1980 Superbike championship, second to Eddie Lawson in 1981, while also splitting time on the European Grand Prix circuit helping Honda develop the NR500 four-stroke.
By 1982, Spencer had moved full-time to Honda's Grand Prix team, now focused on the NS500 three-cylinder two-stroke. In 1983, at age 21, he won his first 500cc World Championship, becoming at that time the youngest rider ever to claim the premier class title — a record previously held by Mike Hailwood. The 1983 season was one of the most dramatic title battles in Grand Prix history: Spencer and Yamaha's Kenny Roberts traded the points lead across the season, each winning six races. At the penultimate round in Sweden the two collided on the final lap; Roberts went off track, Spencer sprinted to victory. Roberts won the final race but Spencer's second-place finish secured the title by two points.
In 1984, Honda introduced the radically new V4 NSR500 with the fuel tank beneath the engine. Teething problems and crash injuries hampered Spencer's title defense, leaving him fourth overall, though he still managed five victories between the NSR500 and the older NS500.
1985 was the pinnacle of Spencer's career. He opened the year by winning the Daytona 200, then contested both the 500cc and 250cc Grand Prix World Championships simultaneously — an exceptionally demanding schedule. He won both titles in the same year, making him the only rider ever to achieve that feat. He also won the Formula 1 class, becoming the only rider to win all three divisions in a single year. The physical toll of competing in two championships was significant: career-shortening wrist injuries that many believe were directly caused by the strain of that double campaign.
After his historic 1985 season, Spencer never won another Grand Prix. He retired from Grand Prix racing at the beginning of 1988, though he made two comeback attempts, in 1989 and 1993, without success. He returned to the AMA Superbike Championship in the 1990s, winning three races. He campaigned for Two Brothers Racing Honda in 1991 and 1992 before a stint on a Fast By Ferracci Ducati in 1995, eventually riding the works Ducati after taking over from Mauro Lucchiari in the Superbike World Championship.
Spencer is regarded as one of the most accomplished motorcycle racers of the early 1980s. He was inducted into the AMA Motorcycle Hall of Fame in 1999, the Motorsports Hall of Fame of America in 2001, and the Louisiana Sports Hall of Fame in 2009. The FIM named him a Grand Prix Legend in 2001. The city of Shreveport declared "Freddie Spencer Day" in 1984 following his first 500cc title, with the Sheriff of Caddo Parish making him an honorary deputy. For many years Spencer operated Freddie Spencer's High Performance Riding School, primarily based in Las Vegas, until October 2008. He subsequently moved to London and has worked as a television commentator for various racing series. In 2019, he was appointed chairman of the FIM MotoGP Stewards Panel.