Born in 1926 in New York City, the son of Russian immigrants, Matusow served in Europe during the Second World War. On returning to New York he worked in various creative fields, including journalism and stage and radio acting, and became an active member of the Communist Party USA.
In 1950, Matusow, a young and low-ranking party member employed as a clerk in the Communist Party bookstore in Manhattan, walked in to the FBI and offered his services as a paid informant. During a 1950 summer road trip to the West Coast, he made a prolonged stop at the San Cristobal Valley Ranch, a resort near Taos, New Mexico, favored by progressives, and he filed detailed reports with the Albuquerque office of the FBI there, which paid him $75 a month; he listed the license plate numbers of cars in the resort's parking lot and noted the comings and goings of people he recognized as party members or he alleged were members. Notable visitors to the ranch during his stay included Jessica Mitford and Virginia Durr, but he does not appear to have identified them in his reports. In December, Matusow was abruptly summoned to New York and expelled from the party; soon afterward, the FBI, deciding that he was of no further use, dropped him from the rolls of its paid informants.
Matusow, freed from FBI supervision, went, on his own initiative, to HUAC and offered to testify in upcoming trials and hearings as a paid expert witness by providing information on his former Communist Party comrades and people he claimed to have known or met in party circles. He also became an editor of the anticommunist bulletin Counterattack and worked as a campaign aide to Joseph McCarthy. While working as an informant, Matusow provided information against folksingers associated with People's Songs, where he had briefly worked, including Pete Seeger, and later claimed to know that 126 communists worked for the Sunday New York Times even though the total number of employees was alleged to be 100. Matusow also claimed that he had known Clinton Jencks, an officer of the Mine, Mill & Smelter Workers Union to be a member of the American Communist Party; that resulted in Jencks being sent to prison for perjury for having signed, as a union official, a required affidavit of nonmembership in the Communist Party under the Taft-Hartley Act.
Seeger's band, The Weavers, went from a hit record with "Wimoweh" to being blacklisted and finding no work. Seeger was later sentenced to one year in prison for contempt of Congress after he was subpoenaed to appear before HUAC and refused to testify, citing the First Amendment's guarantee of freedom of speech as his justification (the sentence was vacated on technical grounds); Seeger eventually forgave Matusow for his youthful mistakes and noted that Matusow never did more than cost Seeger a few jobs.
Harvey Matusow met fellow FBI informer, Elizabeth Bentley, on 3 October 1952, at the offices of her publisher. Matusow began a relationship with Bentley. He later claimed that she was self-medicating for depression and anxiety: "She used alcoholism to ease her pain and she had a lot of pain." At the end of the evening, he would take her home and "pour" her into bed. Every couple of weeks, they would sleep together, but usually, she was too drunk. Matusow claimed that she was upset at her "frivolous treatment" in the press. "She didn't understand the hostility.... She never got to the point where she could handle it." Bentley complained about the way she had been treated by the FBI: "She felt that she'd been used and abused."