He moved to New York to simultaneously attend graduate school at Columbia University's MFA writing program, New York University's Tisch School of the Arts for filmmaking,  and Brooklyn College for fiction writing,  while also attending the low-residency writing program at North Carolina's Warren Wilson College for poetry. He received his MFA from Columbia in 2010. Franco is a PhD student in English at Yale University and also attended the Rhode Island School of Design.

The actor opted against watching the 2011 Academy Award nominees be announced (where he was a top contender) in favor of attending class. "I'm not gonna miss class to go and presume that I'm going to be nominated, but if you want to bring out a camera crew to Yale and wait and see if I get nominated, I'd be happy to step out of class and say I'm very grateful," he commented.

It was announced on March 2011 that Franco teaches a fall semester course on modifying poetry into short films to ten to twelve third-year graduate film students at NYU. The course will focus mainly on production, meaning that the students will be in charge of creating their own film based on poetry. At the time of the announcement, the actor had yet to put together a syllabus, but has until the summer time to do so.

When asked about his education, Franco said that he loves school and that it keeps him focused as well as grounded. "I go to school because I love being around people who are interested in what I'm interested in and I'm having a great experience... I'm studying things that I love so it's not like it's a chore," he told the Washington Post, according to a New York Magazine article.  Franco has also credited his education for helping him "take acting seriously" when his parents did not see it as a successful post-college career.

Franco developed an aptitude for art—painting in particular—during his high school years while attending the California State Summer School for the Arts (CSSSA).  Franco has said painting was the "outlet" he needed in high school, and he "has actually been painting longer than he has been acting." His paintings were displayed publicly for the first time at the Glü Gallery in Los Angeles, from January 7, through February 11, 2006.  He launched his first European art exhibition in 2011 at Peres Projects in Berlin. He enjoys reading on the set of his films. Pineapple Express producer Judd Apatow has said of him: "He's a very education-minded person. We used to laugh because in between takes he'd be reading The Iliad on set. We still haven't read The Iliad. It was a very difficult book. With him, it was always James Joyce or something."

In an interview with Showbiz411, on September 23, 2010, Franco made the erroneous public announcement that he received a "D" grade in "Acting" class at the NYU Graduate Film School. It was in fact a "Directing the Actor" class. Franco admitted to missing most of his classes that semester. A professor at New York University, José Angel Santana, alleged that Franco did not earn his grades while attending that school, stating that Franco missed over 80% of his classes and only received high marks and a degree because of his celebrity status as an actor. In September 2012, Santana filed a lawsuit against Franco for defamation seeking unspecified damages.  In September 2013, James Franco and professor José Angel Santana settled the defamation lawsuit. "The matter has been resolved to the mutual satisfaction of the parties,” said Santana's attorney Matthew Blit.

Franco defended himself when he was on the Howard Stern Show, stating that he missed the classes to film 127 Hours.  Franco has taught at USC, UCLA, CalArts and NYU in Film and English departments. For his students' film projects, he has helped to attach actors including Seth MacFarlane, Kate Mara, Natalie Portman, Chloe Sevigny, Kristen Wiig and Olivia Wilde. In March 2013, Franco was featured in half-page print advertisements for his alma mater UCLA, which celebrated the university's famous alumnus as a "prolific academic," and carried the tagline: 'Some A-Listers Actually Get A's."