Dolby began his career in 1949 working for the Ampex Corporation, where he helped to develop early videotape recording systems. He founded Dolby Laboratories in London in 1965. The company went on to become an industry leader in audio technology, devising ways to cut background hiss in tape recordings and later developing surround sound. The company relocated to San Francisco in 1976.

Dolby earned many honors during his lifetime, including a Grammy award in 1995 and Emmy awards in 1989 and 2005. His son, filmmaker and novelist Tom Dolby said, "Though he was an engineer at heart, my father's achievements in technology grew out of a love of music and the arts. He brought his appreciation of the artistic process to all of his work in film and audio recording."