Welch then served in tactical fighter units in Europe, the continental United States and Alaska before transferring to the Republic of Vietnam where he flew combat missions in F-4C Phantom IIs over North and South Vietnam, and Laos. After completing the Armed Forces Staff College in July 1967, Welch was assigned to Headquarters U.S. Air Force, Washington, D.C., under the assistant chief of staff for studies and analysis. Upon graduation from the National War College in July 1972, he was assigned to Tactical Air Command, where he served in wing deputy commander for operations, vice commander and wing commander positions. . In August 1977, he transferred to Headquarters Tactical Air Command where he served as inspector general, deputy chief of staff for plans and deputy chief of staff for operations. In June 1981, he became commander of the Ninth Air Force and Air Force component commander for the Rapid Deployment Joint Task Force. In November 1982, he was assigned as deputy chief of staff for programs and resources at Air Force headquarters and became Vice Chief of Staff of the United States Air Force in July 1984. From August 1985 to June 1986, he served as commander in chief, Strategic Air Command, and director, Joint Strategic Target Planning Staff, Offutt Air Force Base, Nebraska. He became Chief of Staff of the United States Air Force in July 1986. Welch is one of only a handful of modern service chiefs to have risen from enlisted rank to his service's highest position. In March 1989, Larry Welch was rebuked by Defense Secretary Dick Cheney who intended to maintain civilian control of the military, due to Welch's unauthorized talks with a Congressman discussing some unresolved issues.
Welch was promoted to general on August 1, 1984, with same date of rank and retired on July 1, 1990. In 1998 he spent several months on the Rumsfeld Commission, which reported to Congress on the ballistic missile threat to the United States. In 2009, Welch retired as the president of the Institute for Defense Analyses in Alexandria, Virginia. He continues to serve as a Senior Fellow at the Institute for Defense Analyses. He also serves on the Defense Policy Board, the USSTRATCOM Strategic Advisory Group, the Sandia Corporation Board of Directors, and the Lawrence Livermore National Laboratory Director's Review Committee. In October 2007, Welch was asked by Robert Gates to lead the Defense Science Board task force that would study the 2007 United States Air Force nuclear weapons incident as part of a larger review of US Department of Defense procedures and policies for handling nuclear weapons. Welch briefed the results of the review before the U.S. Senate Committee on Armed Services on February 12, 2008. In 2014, Secretary of Defense Hagel asked Welch and retired Admiral John Harvey to lead an Independent Review of the Department of Defense Nuclear Enterprise. The report was delivered to the Secretary of Defense in June 2014.