After having dropped out of Harvard University Newell spent thirteen years working for Microsoft Corporation, ultimately becoming a "Microsoft Millionaire". Newell has described himself as "producer on the first three releases of Windows". Inspired by Michael Abrash, who left Microsoft to work on the computer game Quake at id Software, Newell and another Microsoft employee, Mike Harrington, left Microsoft to found Valve in 1996. He and Harrington used their money to fund Valve through the development of Half-Life.
During production on Half-Life 2, he spent several months focusing on the Steam project.
In 2007, Newell openly expressed his displeasure over developing his software for gaming consoles, particularly the PlayStation 3. In regard to the system, Newell was once quoted as claiming that developing processes for the console in general was "a waste of everybody's time" and "a disaster on many levels ... I'd say, even at this late date, they should just cancel it and do a do over. Just say, 'This was a horrible disaster and we're sorry and we're going to stop selling this and stop trying to convince people to develop for it'." Nevertheless, at E3 in 2010, Newell appeared on stage at Sony's keynote; while acknowledging his past outspoken comments on console development, he discussed the open nature of Sony's PlayStation 3 platform, and announced Portal 2 for the console, remarking that with Steamworks support it would be the best version for any console. Newell has also criticized the Xbox Live service, referring to it as "a train wreck". He was also intensely critical of Microsoft's operating system Windows 8, calling it a "catastrophe" and a threat to the usually open nature of PC gaming.
In December 2010, Forbes named Newell as "A Name You Should Know" mainly for his work on Steam having partnerships with multiple major developers. In March 2012, Forbes estimated the net worth of Newell as $1.5 billion, ranking 854th out of 1,226 global billionaires.
In March 2013 Newell received the BAFTA Fellowship Award for his outstanding and exceptional creative contribution to the video games industry.
In 2014, Paranautical Activity was mis-labelled on the Steam store as an incomplete game, so the lead developer sent a death threat to Newell on Twitter. In response, the game was removed from store. The developer later apologised and resigned from the company.
Gabe is married to Lisa Mennet and has two sons. He suffered from Fuchs' dystrophy, a congenital disease which affects the cornea, but was cured by two cornea transplants in 2006 and 2007. He is a financial supporter of the Democratic Party.
His favorite games are Super Mario 64, Doom, and Star Trek played on a Burroughs mainframe computer. Doom convinced him that video games were the future of entertainment, and Super Mario 64 convinced him that video games were art.
Newell has said that he has tried to grow into his public image: "They hug me when they run into me. I'm not a hugging person, but that's what they want. I was with my kids the first time that happened in public, and my kids were pretty cool with it. But I wasn't. 'Dad, roll with it.' Even now, I'm learning from our customers." Within the gaming community, he is nicknamed Gaben, after his work email address.