Phillips, who was born in Wilkes-Barre, Pennsylvania, was educated at the Massachusetts Institute of Technology, where he gained his PhD in 1976. He then joined the staff of the National Bureau of Standards and Technology, Maryland.

In the early 1980s Phillips and his colleagues showed how beams of sodium atoms could be cooled down to temperatures of about 0.1 kelvin, just a tenth of a degree above absolute zero. The method involved exposing the sodium atoms to a laser beam tuned to a frequency lower than the resonant frequency of the atoms. Some of the atoms moving toward the laser light, because of an appropriate Doppler shift, will absorb and emit light photons. The process, repeated endlessly, will slow the atoms down. Atoms moving in the direction of the laser beam, however, because the frequency will be shifted lower, are less likely to absorb radiation and their motion is little affected.

Soon after this, Steven Chu developed the technique so that it could be applied to a gas rather than a beam of atoms and isolated and cooled individual atoms to a temperature of 240 microkelvins. Unfortunately, atoms could be contained in Chu's optical laser trap for no more than a second. In 1988 Phillips sought to improve the trap by using a varying magnetic field placed above and below the area in which the laser beams intersected. This reduced the temperature of the confined atoms to 40 microkelvins. With this technique Phillips found that he need only reduce the atom's speed to less than 3.5 meters per second, corresponding to a temperature of 17 millikelvins, for the atoms to be held in the laser trap for several seconds.

For his work in this field Phillips shared the 1997 Nobel Prize for physics with Steven Chu and Claude Cohen-Tannoudji.