Milgrom is the Shirley and Leonard Ely professor of Humanities and Sciences in the department of economics and professor by courtesy at Stanford Graduate School of Business. He is a member of the National Academy of Sciences, a fellow of the American Academy of Arts and Sciences, and director of the Market Design program at SIEPR.

After earning his PhD at Stanford GSB, Milgrom taught at Northwestern University and Yale before returning to Stanford. He has made well-known contributions to many areas of economics, including auctions, incentive theory, industrial economics, economic history, economics of manufacturing, economics of organizations, and game theory. His book coauthored with John Roberts, Economics, Organization and Management, opened a new area to economic research.

He is best known, however, for his contributions to the theory of auctions, much of which is summarized in his book, Putting Auction Theory to Work, published by Cambridge University Press, and for his contributions to the practice of auction design. According to the National Science Foundation, Milgrom was the main academic contributor to the original FCC spectrum auction design — the simultaneous ascending auction. This design, which Milgrom developed with colleagues Robert Wilson and Preston McAfee, has been copied and adapted for dozens of auctions of radio spectrum, electricity, and natural gas involving hundreds of billion dollars worldwide. Still active in both the theory and practice of auction design, Milgrom has advised Microsoft Networks on sponsored search auctions, Google on its IPO auction of shares, Yahoo! on the design of an advertising marketplace, the Oregon Public Utilities Commission on sales of generating assets, Mexico on privatization auctions of state-owned assets, and various spectrum regulators in the U.S., UK, Canada, Australia, Germany, and Mexico on sales of radio spectrum.