Born in Muncie, Indiana, Douglass graduated from Trotwood-Madison High School in 1982 and then played defensive back for Kentucky. In 1984, he was a junior college transfer from Coffeyville Community College and earned the starting job for Kentucky after two games. He made an interception on his first play from scrimmage against the Rutgers Scarlet Knights team on October 6. Two weeks later he had an interception that set up a 36-yard field goal against LSU. He totalled three interceptions in his two-year career at Kentucky. On November 3, he recovered a fumble against North Texas State. That season Kentucky got off to a 5–0 start, but they lost to all three ranked Southeastern Conference schools that they faced and finished the season 9–3.

In September 1985, he suffered from a pinched nerve and was notable for having blown his defensive coverage on two plays in a 27–7 victory over Cincinnati Bearcats. The last of his interceptions occurred on November 16, 1985 against the Florida Gators when his 43-yard return set up Kentucky’s touchdown that gave them a 13–12 lead. However, in the waning seconds as they clung to a 13–12 lead, his attempt at a second interception on an errant halfback option pass by future Bears teammate Neal Anderson slipped away and Florida was able to execute the winning field goal in their 15–13 victory. Douglass was selected to play for the Gray team in the 1985 Blue–Gray Football Classic.

Douglass was one of the final five players cut during training camp by the Bears at the beginning of September, but they re-signed him in late November when they put Jim McMahon on injured reserve. He did not play much in 1986, but was described as a favorite of coach Mike Ditka by the Chicago Sun-Times. Chicago Tribune writers noted that Ditka got a kick out of his big earring and fashion sense. In the 1987–88 NFL playoffs, although had only one previous start in his two-year career, he started for the Bears in place of five-year veteran Mike Richardson at left cornerback against the Redskins in their January 10, 1988 Divisional playoff game. The following season, when Shaun Gayle suffered a season-ending injury for the 1988 Bears, he took over the starting free safety assignment.

In March 1989, he testified against sports agents Norby Walters of New York and Lloyd Bloom of California in United States District Court in Chicago in a trial about “inducing college athletes to sign professional contracts in violation of National Collegiate Athletic Association rules, and of threatening bodily harm”. He told the jury that Bloom threatened that “somebody might break my legs” if he attempted to break his contract. In April, the agents were convicted of five counts of racketeering and fraud.

In August 1989, he was one of thirteen athletes issued a four-game suspension for using steroids. Following the suspension, the Bears activated him in October.

In September 1994, New York Jets fullback Richie Anderson dislocated an index finger punching Douglass in the head, while Douglass was wearing a football helmet, in reaction to what he believed was a late hit on teammate Adrian Murrell. Anderson was ejected from the game. In his nine seasons with the Bears, he earned a reputation as an excellent special teams player.

Prior to his time with the Giants, he worked as a male stripper. Following the 1994 NFL season, Douglass signed with the New York Giants in April. The two-year contract was estimated at $1.4 million. Douglass was impaired by a quadriceps injury in 1995 Giants training camp. The injury recurred during the season. He had performed well as the nickel back as a Giant. However, in October, he fractured his left fibula and was out for the rest of 1995 NFL season.

In 2001, he became the football coach at his alma mater Trotwood. He transformed the program by spending time creating player highlight reels, responding to college recruiters and taking his athletes on college tours. Subsequently, the athletes began getting college scholarship offers. In his first seven years nearly 100 of his players went on to play college football and over one-third at Division I programs. He is said to have a relaxed mentoring style of coaching and is known as Coach Doug. In 2007, the team made the playoffs for the first time since 1982. That year, he was charged with illegally recruiting athletes to play for his team. Upon review by the Ohio High School Athletic Association, he and his staff were found guilty of the charge. In 2008, he was placed on suspension for three weeks and his offensive coordinator resigned. The school was placed on two-year probation.

In 2014, Douglass left Trotwood and became the head coach at Springfield High School. Before taking the position at Springfield, Douglass turned down an opportunity to coach defensive backs for Vanderbilt under new head coach Derek Mason.