Travis Bickle, a 26-year-old honorably discharged U.S. Marine, is a lonely, depressed young man living in isolation in New York City. He takes a job as a taxi driver to cope with his chronic insomnia, driving passengers every night around the city's boroughs. He also frequents the porn theaters on 42nd Street and keeps a diary in which he consciously attempts to include aphorisms, such as "You're only as healthy as you feel."

Travis becomes infatuated with Betsy, a campaign volunteer for Senator and presidential candidate Charles Palantine. After watching her interact with fellow worker Tom through her window, Travis enters to volunteer, as a pretext to talk to her, and takes her out for coffee. On a later date, he takes her to see a pornographic film, which offends her, and she goes home alone. His attempts at reconciliation by sending flowers are rebuffed, so he berates her at the campaign office, before being kicked out by Tom.

Travis confides in fellow taxi driver Wizard about his thoughts, which are beginning to turn violent; however, Wizard assures him that he will be fine, leaving Travis to his own destructive path. Travis is disgusted by the sleaze, dysfunction, and prostitution that he witnesses throughout the city. His worldview is furthered when an adolescent prostitute and runaway, Iris, enters his cab, attempting to escape her pimp, Sport. Sport drags Iris from the cab and throws him a crumpled $20 bill, which continually reminds Travis of her and the corruption that surrounds him.

In attempting to find an outlet for his frustrations, Travis begins a program of intense physical training. A fellow taxi driver refers him to an illegal gun dealer, "Easy" Andy, from whom Travis buys several handguns. At home, Travis practices drawing his weapons, and modifies one to allow him to hide and quickly deploy it from his sleeve. One night, Travis enters a convenience store moments before an attempted armed robbery, and he fatally shoots the robber. The shop owner takes credit for the deed, taking Travis' handgun. Later, Travis encounters Iris again and hires her, but attempts to dissuade her from continuing in prostitution rather than having sex with her. He fails to completely turn her from her course, but she does agree to meet with him for breakfast the next day. Travis leaves a letter to Iris at his apartment saying he will soon be dead, and money for her to return home.

After shaving his head into a mohawk, Travis attends a public rally where he plans to assassinate Palantine, but Secret Service agents notice him with his hand in his coat and chase him off. Travis flees and later goes to the East Village to invade Sport's brothel. A violent gunfight ensues, and Travis kills Sport, a bouncer, and a mafioso; Travis is severely injured, sustaining multiple gunshot wounds. Iris witnesses the fight and, hysterical with fear, pleads with Travis to stop the killing. After the gunfight, Travis attempts suicide, but has run out of ammunition and resigns himself to lying on a sofa. When the police arrive, he places his index finger against his temple, pantomiming the act of shooting himself.

Having recovered from his wounds and returned to work, Travis finds himself hailed as a local hero in the press for shooting the three men. He receives a letter from Iris' father, thanking him for saving her life and revealing that she has returned home to Pittsburgh, where she is going to school. Later, Travis reconciles with Betsy when dropping her off at her home in his cab. When she tries to pay her fare, he smiles at her and turns off the meter. As Travis drives off, he suddenly becomes agitated after noticing something in his rear-view mirror.

According to Scorsese, it was Brian De Palma who introduced him to Schrader. In Scorsese on Scorsese, the director talks about how much of the film arose from his feeling that movies are like dreams or drug-induced reveries. He admits attempting to incubate within the viewer the feeling of being in a limbo state somewhere between sleeping and waking. He calls Travis an "avenging angel" floating through the streets of a New York City intended to represent all cities everywhere. Scorsese calls attention to improvisation in the film, such as in the scene between De Niro and Cybill Shepherd in the coffee shop. The director also cites Alfred Hitchcock's The Wrong Man and Jack Hazan's A Bigger Splash as inspirations for his camerawork in the movie.

In Scorsese on Scorsese, the director mentions the religious symbolism in the story, comparing Bickle to a saint who wants to cleanse or purge both his mind and his body of weakness. Bickle attempts to kill himself near the end of the movie as a tribute to the samurai's "death with honour" principle.

When Travis meets Betsy to join him for coffee and pie, she is reminded of a line in Kris Kristofferson's song "The Pilgrim, Chapter 33": "He's a prophet and a pusher, partly truth, partly fiction—a walking contradiction." On their date, Bickle takes her to see a Swedish "sex education" film, which is in fact the American sexploitation film Sexual Freedom in Denmark with added Swedish sound.

Shot during a New York City summer heat wave and sanitation strike in 1975, Taxi Driver came into conflict with the MPAA for its violence (Scorsese de-saturated the color in the final shoot-out, and the film got an R rating). To achieve the atmospheric scenes in Bickle's cab, the sound men would get in the trunk and Scorsese and his cinematographer, Michael Chapman, would ensconce themselves on the back seat floor and use available light to shoot. Chapman admitted the filming style was greatly influenced by Nouvelle Vague filmmaker Jean-Luc Godard and his cinematographer Raoul Coutard due to the fact the crew didn't have the time nor the money to do "traditional things."

In writing the script, Schrader was inspired by the diaries of Arthur Bremer (who shot presidential candidate George Wallace in 1972) and Fyodor Dostoyevsky's Notes from Underground. The writer also used himself as inspiration; in a 1981 interview with Tom Snyder on the "Tomorrow" show, Schrader related his experience living in New York City while battling chronic insomnia, which led him to frequent pornographic bookstores and theaters because they remained open all night. Following a divorce and a breakup with a live-in girlfriend, he spent a few weeks living in his car. He wrote the script in under a month while staying in his former girlfriend's apartment while she was away. Schrader decided to make Bickle a Vietnam vet because the national trauma of the war seemed to blend perfectly with Bickle's paranoid psychosis, making his experiences after the war more intense and threatening. Thus, Bickle chooses to drive his taxi anywhere in the city as a way to feed his hate.

While preparing for his role as Bickle, De Niro was filming Bernardo Bertolucci's 1900 in Italy. According to Boyle, he would "finish shooting on a Friday in Rome ... get on a plane ... fly to New York." De Niro obtained a cab driver's license, and when on break would pick up a cab and drive around New York for a couple of weeks, before returning to Rome to resume filming 1900. De Niro apparently lost 35 pounds and listened repeatedly to a taped reading of the diaries of Arthur Bremer. When he had time off from shooting 1900, De Niro visited an army base in Northern Italy and tape-recorded soldiers from the Midwestern United States, whose accents he thought might be appropriate for Travis's character.

When Bickle decides to assassinate Senator Palantine, he cuts his hair into a Mohawk. This detail was suggested by actor Victor Magnotta, a friend of Scorsese's who had a small role as a Secret Service agent and who had served in Vietnam. Scorsese later noted:

"Magnotta had talked about certain types of soldiers going into the jungle. They cut their hair in a certain way; looked like a Mohawk ... and you knew that was a special situation, a commando kind of situation, and people gave them wide berths ... we thought it was a good idea."

Shooting took place on New York City's West Side, at a time when the city was on the brink of bankruptcy. According to producer Michael Phillips, "the whole West Side was bombed out. There really were row after row of condemned buildings and that's what we used to build our sets, were condemned buildings. Now it's fashionable real estate...But New York and Times Square was shuddering and disgusting. It's just exciting to see the city bounce back and become the great place it is today from where it was then. We didn't know we were documenting what looked like the dying gasp of New York."

The Terminal Bar was featured in a scene in the film.

Taking place in an actual apartment, the tracking shot over the murder scene at the end took three months of preparation just because the production team had to cut through the ceiling in order to get it right.

Scorsese brought in the film title designer Dan Perri to design the title sequence for Taxi Driver. Perri had been Scorsese's original choice to design the titles for Alice Doesn't Live Here Anymore in 1974, but Warner Bros would not allow him to hire an unknown designer. By the time Taxi Driver was going into production, Perri had established his reputation with his work on The Exorcist, and Scorsese was now able to hire him. Perri created the opening titles for Taxi Driver using second unit footage which he colour-treated through a process of film copying and slit-scan, resulting in a highly stylised graphic sequence that evoked the "underbelly" of New York City through lurid colours, glowing neon signs distorted nocturnal images and deep black levels. Perri went on to design opening titles for a number of major films after this including Star Wars (1977) and Raging Bull (1980).

The music by Bernard Herrmann was his final score before his death on December 24, 1975, and the film is dedicated to his memory. Robert Barnett of MusicWeb International has said that it contrasts deep, sleazy noises, representing the "scum" that Travis sees all over the city, with the saxophone, a musical counterpart to Travis, creating a mellifluously disenchanted troubadour. Barnett also observes that the opposing noises in the soundtrack—gritty little harp figures, hard as shards of steel, as well as a jazz drum kit placing the drama in the city—are indicative of loneliness in the midst of mobs of people. Deep brass and woodwinds are also evident. Barnett heard in the drumbeat a wild-eyed martial air charting the pressure on Bickle, who is increasingly oppressed by the corruption around him, and that the harp, drum, and saxophone play significant roles in the music.

Jackson Browne's "Late for the Sky" is also featured in the film, appearing in a scene where couples are dancing on the program American Bandstand as Travis watches on his television.