Proaño was ordained as a priest in 1936 and soon became interested in the latest trends Catholic social doctrine. Within the Ibarra diocese, he created the Juventud Obrera Cristiana (Christian Youth Workers). He was named bishop of Riobamba in 1954. From his cathedral in Riobamba, he fought constantly to introduce social justice in relations with indigenous people and to promote indigenous access to public life and political power (he thus became known as "the bishop of the Indians").
He enthusiastically adopted the thesis of liberation theology. In 1960, he created the Escuelas Radiofónicas Populares, with a clear educational goal. In 1962, he created the Center of Studies and Social Action to aid the development of indigenous communities. In 1973, he was accused of guerrilla warfare and had to stand trial in Rome, but he was cleared of all charges. In 1976, he was jailed during the dictatorship of Guillermo Rodríguez Lara.