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After graduation, he began his teaching and coaching career at Shiloh and Saltilo high schools. An innovative coach, he was first to use the hook shot and the 2-3 zone defense.

In 1940, he went to Bethel College to coach and finish his last two years of college work. His first Bethel team posted a 27-4 record. When Bethel dropped athletics because of the war, Varnell coached at McKenzie High School.

In 1944, Adolph Rupp invited Varnell to work with him at the University of Kentucky. There he helped to recruit the "Fabulous Five."

Bethel re-instated athletics when the war ended and Varnell returned to coach the basketball and baseball teams. His basketball team lost only one game and his baseball team was undefeated.

Varnell became head basketball coach and assistant football coach at the University of the South in Sewanee, TN. In 1948. Rupp recommended him for the job saying, "Next to me Lon Varnell is the best coach in America." He coached at Sewanee, TN., in the best coach in America." He coached at Sewanee for 22 years, winning 58% of his games while playing Division I and II schools as well as conference foes.

Varnell also began working with the Harlem Globetrotters in 1948. As a promoter and later as an advance man, he traveled worldwide with them, and helped to open the South for their performances.

In 1951, Varnell's University of the South team won 53 of the 57 games they played on a tour of Europe and North Africa. They also won the World Tournament in Geneva, Switzerland. Five Rhodes Scholars played on his teams as well as several outstanding coaches, including ex-Kentucky coach Joe B. Hall.

Sports Illustrated described Varnell in February, 1969, as "a legend in his own time-a coach, a Methodist minister, coal mine operator, car dealer, political campaign manager, hardware store owner and promoter of entertainment."

Varnell was inducted into the Tennessee Sports Hall of Fame in 1973 and served as its president in 1977.