Gorman began his career at Celtic, but only played one game, a Scottish League Cup match in 1968. He was released and signed for Carlisle United and was almost ever present in their one season in the old First Division. He signed for Tottenham Hotspur in 1976 before injury as a result of a tackle by Jimmy Case lost him his place. The injury caused him to miss the final part of Spurs' unsuccessful relegation fight in 1977, and all of Spurs' promotion season of 1977-78. In 1979, he moved to the United States where he signed with the Tampa Bay Rowdies of the NASL. He remained with Tampa Bay for four seasons and was a 1979 Second Team, 1980 Honorable Mention and 1981 First Team All Star. In the fall of 1982, he moved to the Phoenix Inferno of the Major Indoor Soccer League. He played two seasons with Phoenix, the second after the team became known as the Phoenix Pride.
Gorman's coaching career has often been intertwined with his longtime friend Glenn Hoddle, starting when Gorman became Hoddle's assistant at Swindon Town in 1991. With Hoddle as player-manager and featuring in most of the club's games, Gorman received plenty of the credit for this turnaround. So much so, that when Glenn Hoddle left to take over at Chelsea in 1993 he offered Gorman the chance to join him. His mind was made up when Town chairman Ray Hardman offered him the vacant manager's position; he accepted (a popular decision at the time) and looked forward to the forthcoming season in the Premier League, to which Swindon had just won promotion. However, it was not a successful first season in the top flight for the Wiltshire club, who did not win a league game until their 16th match and ended the season relegated in bottom place with just five wins and having conceded 100 goals from 42 matches. A promising start to the following season suggested that a quick return to the Premier League was possible, but a downturn in form dragged Swindon into the bottom half of the table and Gorman was sacked in November 1994.
After leaving Tottenham in 2003 he was briefly caretaker manager at Wycombe but was passed over in favour of Tony Adams. He was taken on as an assistant to Andy Hessenthaler at Gillingham, and acted as caretaker manager after Hessenthaler stepped down before returning to Wycombe as manager after Adams' resignation in late 2004
After turning around Wycombe's poor form, the club finished the 2004–05 season strongly and only just missed out on a play-off place. At the start of the 2005–06 season, a new club record was set by going 21 consecutive league games unbeaten. Towards the end of the season it was announced that Gorman would be taking a temporary leave of absence for personal reasons, his wife Myra having died from cancer a few weeks earlier. However it was announced on 26 May that the club and manager had parted company permanently.
On 5 June 2006 Gorman was announced as the new manager of Northampton Town replacing Colin Calderwood. Calderwood was given the Nottingham Forest position after Northampton finished 2nd in League Two and were promoted. On 20 December, Gorman resigned citing personal reasons. He later attributed his departure to stress. He had been in charge for 22 league games, which saw five wins, with just one at home all season.
In May 2007 he became the chief scout at Southampton. Following George Burley's departure to become Scotland manager in January 2008, he was appointed joint caretaker manager, along with Jason Dodd. After a stint as caretaker manager, John Gorman was relieved of his duties after Nigel Pearson was placed in charge of the club on 19 February 2008. Gorman and Dodd both left the club in June 2008, following the appointment of new manager Jan Poortvliet.
On 30 December 2008, Gorman was appointed Assistant Manager of Ipswich Town, having previously been with the club 10 years prior in the same role. Gorman was released in April 2009 when Jim Magilton was sacked as manager.
On 8 June 2009, Gorman was appointed assistant manager of Queens Park Rangers, and thus reunited with his old friend, manager Jim Magilton but left by mutual consent in December 2009 along with Magilton.
On 10 May 2010, Gorman was appointed Assistant Manager of MK Dons, under new manager Karl Robinson. On 2 May 2012, Gorman announced that he will retire from football at the end of the season after the Dons conclude their League One play-off campaign.