Baxter joined his first band at age 11. In junior high school in Mexico City, Jeff formed a surf band that hit the top 10 on radio in Mexico. While still a high school student, he worked at Jimmy's Music Shop in Manhattan in 1965 and 1966. At Jimmy's, Baxter met guitarist Jimi James (later to become Jimi Hendrix), who was just beginning his career as a frontman, and provided him with his first custom left-handed Fender Stratocaster. Baxter and Hendrix went on to become good friends. After leaving Jimmy’s, Baxter moved on to Dan Armstrong’s guitar repair and custom shop, the mecca for guitar players in New York and around the United States. Moving to Boston to attend college, Baxter worked as a guitar technician and amplifier repairman at Jack's Drum Shop on Boylston Street.
Skunk first reached a wide rock audience in 1968 as a member of the psychedelic rock band Ultimate Spinach. Baxter joined the band for Ultimate Spinach III, their third and final album. After leaving the band, he played with the Holy Modal Rounders, played bass for Tim Buckley and joined the Buzzy Linhart band. While still in Boston, Baxter began establishing himself as a studio musician in both Boston and New York City.
After the breakup of Ultimate Spinach, Baxter relocated to Los Angeles, finding work as a session guitarist. In 1972 he became a founding member of the band Steely Dan, along with guitarist Denny Dias, bassist Walter Becker, keyboardist-vocalist Donald Fagen, drummer/vocalist Jim Hodder and vocalist David Palmer.
Baxter appeared with Steely Dan on their first three albums, Can't Buy a Thrill in 1972, Countdown to Ecstasy in 1973, and Pretzel Logic in 1974. He contributed the guitar fills and signature solo heard on the group’s highest charting hit " Rikki Don’t Lose That Number."
While finishing work on Pretzel Logic, Baxter became aware of Becker and Fagen's intentions to retire Steely Dan from touring and work almost exclusively with session players. With that in mind, Baxter left the band in 1974 to join The Doobie Brothers, who at the time were touring in support of their fourth album What Were Once Vices Are Now Habits. As a session man, he had contributed pedal steel guitar on Vices as well as "South City Midnight Lady" on its predecessor, The Captain and Me. Baxter's first album as a full member of the group was 1975's Stampede. He contributed an acoustic interlude ("Precis") and significant turns on slide and pedal steel guitar.
While preparing to tour in support of Stampede, Doobie Brothers founder Tom Johnston was hospitalized with a stomach ailment. To fill in for Johnston on vocals, Baxter suggested bringing in singer-keyboardist Michael McDonald, with whom Baxter had worked in Steely Dan. With Johnston still convalescing, McDonald soon was invited to join the band full-time. McDonald's vocal and songwriting contributions, as well as Baxter's jazzier guitar style, marked a new direction for the band. They went on to continued success with the 1976 album Takin' It to the Streets, 1977's Livin' on the Fault Line, and particularly 1978's Minute by Minute, which spent five weeks as the #1 album in the U.S. and spawned several hit singles; Baxter's work on the album includes a performance at the end of "How Do the Fools Survive?".
In early 1979, Baxter and co-founding drummer John Hartman left the band.
Baxter has continued working as a session guitarist for a diverse group of artists, including Willy DeVille, Bryan Adams, Hoyt Axton, Eric Clapton, Sean O'Bryan Smith, Gene Clark, Sheryl Crow, Freddie Hubbard, Tim Weisberg, Joni Mitchell, Ricky Nelson, Dolly Parton, Carly Simon, Ringo Starr, Gene Simmons, Rod Stewart, Burton Cummings, Barbra Streisand, and Donna Summer. He has worked as a touring musician for Elton John, Linda Ronstadt, and Billy Vera and the Beaters. In the spring of 2003 at the invitation of close friend, former roommate and recording and mixing engineer Larold Rebhun, Jeff on a whim arrived at the famed North Hollywood Recording Studio "Glenwood Place" to play guitar and pedal steel on 2 songs (55 Chevy and Cowboy Boots and 501's) written and recorded by United States Navy SEAL Curt Campbell, which are on the "Nature of the Beast" album under The Eclectic Beast Band.