After completing his PhD at Purdue University, Atalla was employed at Bell Telephone Laboratories (BTL) in 1949. In 1950, he began working at Bell's New York City operations, where he worked on problems related to the reliability of electromechanical relays, and worked on circuit-switched telephone networks. With the emergence of transistors, Atalla was moved to the Murray Hill lab, where he began leading a small transistor research team in 1956. Despite coming from a mechanical engineering background and having no formal education in physical chemistry, he proved himself to be a quick learner in physical chemistry and semiconductor physics, eventually demonstrating a high level of skill in these fields. He researched, among other things, the surface properties of silicon semiconductors and the use of silica as a protective layer of silicon semiconductor devices. He eventually adopted the alias pseudonyms "Martin" M. Atalla or "John" M. Atalla for his professional career.
Between 1956 and 1960, Atalla led a small team of several BTL researchers, including Eileen Tannenbaum, Edwin Joseph Scheibner and Dawon Kahng. They were new recruits at BTL, like himself, with no senior researchers on the team. Their work was initially not taken seriously by senior management at BTL and its owner AT&T, due to the team consisting of new recruits, and due to the team leader Atalla himself coming from a mechanical engineering background, in contrast to the physicists, physical chemists and mathematicians who were taken more seriously, despite Atalla demonstrating advanced skills in physical chemistry and semiconductor physics.
Despite working mostly on their own, Atalla and his team made significant advances in semiconductor technology. According to Fairchild Semiconductor engineer Chih-Tang Sah, the work of Atalla and his team during 19561960 was "the most important and significant technology advance" in silicon semiconductor technology.