Gruden was a four-year letterman at Louisville (1985–1988). He finished his collegiate career with 7,024 passing yards (as of 2013, fourth all-time for the school), completing 572 of 1049 passes for 44 touchdowns. All four stats still rank in the top five in Cardinals history. He also ranks in Louisville's top 10 for yards per completion, passing attempts in a season, and completions in a season. He ranks eighth in career completion percentage, seventh in career passing efficiency, and ninth in average yards per game for the Cardinals. Gruden threw for over 300 yards in a game six times at Louisville. As a senior, Gruden led the team to an 8–3 record, their first winning season in 10 years.
Gruden played two seasons in the World League (with Barcelona in '91 and Scotland in '95). He also spent 3 seasons of time in the NFL (Phoenix) and CFL (Sacramento) on practices squads. Gruden won four ArenaBowl titles as the starting quarterback of the Tampa Bay Storm in the Arena Football League. He was named the league's MVP in 1992.
Gruden began his coaching career as the offensive coordinator for the AFL's Nashville Kats in 1997. In 1998, he became head coach of the Orlando Predators, the main rival of the Storm. With Orlando, he won ArenaBowl titles in 1998 and 2000. He un-retired and resumed playing in 2002, this time for the Predators, but retired again and returned to head coaching when his replacement, Fran Papasedero, died after the 2003 season. Gruden has an overall AFL head coaching record of 93–61, including a mark of 11–7 in the playoffs.
In 2009, while the Predators were on hiatus during the bankruptcy reorganization of the AFL, he was selected to be head coach Jim Haslett's offensive coordinator for the Florida Tuskers of the United Football League. As part of his contract, he was not permitted to remain head coach of the Predators. Instead, former Orlando quarterback Pat O'Hara, who led the team to its two ArenaBowl titles when Gruden was head coach, was hired in his place.