The son of a metallurgist, Gallo was born at Waterbury in Connecticut and educated at Providence College, Rhode Island, and Jefferson Medical College, Philadelphia, where he received his MD in 1963. He served his internship at the University of Chicago. In 1965, Gallo joined the staff of the National Cancer Institute at the National Institute of Health, Bethesda, Maryland, and since 1972 he has been head of the Institute's Tumor Cell Biology Laboratory.

Gallo is noted as one of the people who first identified the virus responsible for AIDS. The discovery came out of work in his laboratory on leukemia. The first success by Gallo's team was the identification in 1976 of interleukin-2, a factor that stimulates growth in the lymphocytes known as T-cells. This was followed in 1979 by the crucial discovery of the first human retrovirus, HTLV-1 (human T-cell lymphotropic/leukemia virus). Retroviruses were first described in 1970 by Temin and Baltimore and, unlike other viruses, their genetic material is encoded in DNA rather than RNA. HTLV-1 and another virus discovered by Gallo in 1982, HTLV-2, both cause rare forms of leukemia.

In the early 1980s concern was growing about the emergence and spread of AIDS, a disease characterized by suppression of the patient's immune system. Gallo was aware that HTL viruses acted by attacking the immune system of leukemia patients. He made the bold conjecture that AIDS was caused by yet another retrovirus recently discovered in his laboratory, namely, HTLV-3. Similar conclusions were reached by Luc Montagnier at the Pasteur Institute in Paris, who had succeeded in isolating a retrovirus from an AIDS patient. He named the virus LAV (lymphadenopathy associated virus) and sent Gallo a sample in September 1983.

Gallo began work on finding a test for the AIDS virus. At first the virus proved impossible to grow in sufficient quantities, until Mika Popovich in Gallo's laboratory found a particular strain of T-cell (HUT-78 H9) in which the virus replicated without killing the cell. It was consequently a relatively simple matter, once large amounts of virus were available, to test for antibodies in AIDS sufferers' blood.

In April 1984, before Gallo had published his results, the US Department of Health announced that he had found the cause of AIDS, HTLV-3, and took out patents on Gallo's blood test for AIDS antibodies. Gallo published his results in May 1984. He pointed out that he had identified the virus in 48 out of 167 cases from a risk group and that no evidence of its presence was found in the blood of “115 healthy heterosexuals.”

The award in May 1985 of an exclusive patent for Gallo's test provoked a strong response from the Pasteur Institute. They argued that Gallo's blood test was based upon a virus substantially identical to the LAV strain first isolated by Montagnier. The Institute sued the American Government, and heads of state became involved in the dispute. The issue was finally resolved in 1986 at a meeting in Frankfurt between Gallo and Montagnier. An agreed chronology about the discovery was established and it was also decided that 80% of royalties from the test should go to a new AIDS research foundation. The names of both Gallo and Montagnier would appear on the patent. The issue of the name of the AIDS virus was resolved in 1986 when the International Committee on the Taxonomy of Viruses diplomatically ignored both LAV and HTLV-3 and proposed the name HIV (human immunodeficiency virus).

Gallo's work made him the most cited scientist of the decade with the 418 papers he published between 1981 and 1990 gaining 36,789 citations. He has published a full and popular account of his work in Virus Hunting: AIDS, Cancer and the Human Retrovirus (1991).