Guzmán was born in Cayey, Puerto Rico and was raised in New York City's Greenwich Village and the surrounding Lower East Side neighborhood. His mother, Rosa, was a hospital worker, and his stepfather, Benjamin Cardona, was a TV repairman. A graduate of City College of New York, he began his career not as an actor but as a social worker; however, he moonlighted as an actor and became heavily involved in street theater and independent films. He currently lives with his wife Angelita Galarza-Guzmán and their five children in Sutton, Vermont, where he owns a ranch called Wild Orchid Stables.

Guzman's numerous movie credits include Carlito's Way, Carlito's Way: Rise to Power, Welcome to Collinwood, Stonewall, Waiting..., The Salton Sea, and Lemony Snicket's A Series of Unfortunate Events. He has also appeared on the TV shows Homicide: Life on the Street, Frasier and Oz and had a role in the video game Grand Theft Auto: Vice City and its prequel Grand Theft Auto: Vice City Stories. Guzmán starred in the short-lived 2003 television comedy Luis, and is a commentator on VH1's I Love the '80s Also I Love Toys and its sequels, including I Love the '70s and I Love the '90s. He co-starred on the canceled 2007 HBO series John from Cincinnati. In early 2008, Guzmán starred in "Naturally Aged Cheddar Hunks" TV ads for Cabot Creamery.