Musker was born in Chicago, Illinois, the second oldest of eight children in an Irish Catholic family. His father, Robert J. Musker, who worked for over 40 years at Illinois Bell Telephone, died in 2008 at the age of 84, and his mother, Joan T. Musker (née Lally), died in 2011 at the age of 81.
He attended Loyola Academy in Illinois and then graduated from the Weinberg College of Arts and Sciences at Northwestern University, where he majored in English and drew cartoons for the Daily Northwestern. After that, he served a two-year apprenticeship with famed animator Frank Thomas, a supervising animator of Disney films such as Peter Pan (1953), Lady and the Tramp (1955), and The Aristocats (1970). Musker met Ron Clements during the production of The Fox and the Hound in 1981, where he worked as a character animator under Clements and Cliff Nordberg. Musker teamed up with Clements as story artists on The Black Cauldron before they were removed from the project.
Following the green-lighting of Clements's pitch for an adaptation of the children's book series Basil of Baker Street by Eve Titus into an animated feature, Musker and fellow story artist Burny Mattinson were assigned as the original directors while Dave Michener was brought in as an additional director. Due to a shortened production schedule and multiple story rewrites, Roy E. Disney assigned Mattinson to serve as director/producer while Ron Clements was brought in as another director.

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