Born in Hunter, North Dakota to a doctor and a schoolteacher, he attended North Dakota State University, participating in its ROTC program and graduating in 1939. He served in the United States Army in World War II, first in North Africa and up through Europe, where he was one of the youngest colonels, leading the 2nd Battalion of 141st Infantry of the 36th Infantry Division. He won a Bronze Star twice, and the Silver Star for gallantry in resisting a German assault on December 12, 1944.
Critchfield joined the CIA in 1948. He was tasked with exploiting the fallen Third Reich's intelligence organizations - Reinhard Gehlen and his Gehlen Organization - to gather information about the Soviet Union. This work, which led to the creation of the post-war West German intelligence apparatus, came to include the use of Nazi war criminals. Critchfield defended his actions when the Nazi War Crimes Disclosure Act of 1999 made it public knowledge, disputing that Gehlen himself was a war criminal but admitting to a Washington Post reporter that "there's no doubt that the CIA got carried away with recruiting some pretty bad people".
In the early 1960s, as chief of the division responsible for Iraq, Critchfield became concerned about Soviet influence in the existing government, and recommended that the US support the Baath Party.
His CIA work earned him a Distinguished Intelligence Medal and a Trailblazer Award.
His first wife, Constance Reich Critchfield, died in a traffic accident in 1948. A marriage to Louise Mithoff Critchfield ended in divorce, then in the 1970s he met and married fellow CIA officer Lois Matthews Critchfield.
James Critchfield died in Williamsburg, Virginia of pancreatic cancer, and is buried in Arlington National Cemetery. His posthumous memoir Partners at the Creation was published by the Naval Institute Press in 2003.