Jimmy McDonough says the veteran singer authorised him to write the work, but pulled the plug once it had been completed.
McDonough claims he dedicated eight years of his life to the project and is demanding a court order to allow publication of the book.
Young's spokesman Bob Merlis said he was unaware of the action and was unable to comment on it.
But McDonough's solicitor, Henry Gradstein, confirmed the proceedings had been filed in Los Angeles' Superior Court.
He said: "The loss of almost a decade of Jimmy McDonough's creative life has been devastating to him. The lawsuit alleges that it is the final result of Young's actions."
It is claimed the 54-year-old Canadian, whose career spans more than a quarter of a century, persuaded McDonough to write his biography in 1981.
Artisitic freedom
The proceedings state the writer was given the "artistic freedom" to work on the book, entitled Shakey: The Biography Of Neil Young, with the agreement subject only to the artist's right to request edits or changes to sections that may have been sensitive to his family.
McDonough says Young, who also starred with Buffalo Springfield and Crosby, Stills, Nash and Young, assured him there would be no problem with the publication of the work.
The civil action alleges: "Over a period of eight years, McDonough devoted himself to writing the biography. While doing so, (Young) repeated these assurances to McDonough, even on the day McDonough delivered the manuscript to him."
But it adds that Young "unilaterally repudiated" the agreement with the author and publishing company Random House Inc "without ever stating a single specific objection to any material in the biography".
News of the action comes less than a week after the singer released his latest album, Silver And Gold.
Earlier in the year, he toured with Crosby, Stills and Nash for the first time since 1975.