At Midwest City High School, Gundy played quarterback, and was voted Oklahoma Player of the Year in 1986. Gundy was heavily recruited by the Oklahoma Sooners but in the end signed with the Oklahoma State University Cowboys. He became the starting quarterback midway through his freshman year. Gundy would become the all-time leading passer in Oklahoma State and Big 8 Conference history. In four seasons Gundy threw 49 touchdowns and 7,997 yards, including 2,106 yards in 1987 and 2,163 in 1988. He led the Cowboys to bowl wins in the 1987 Sun Bowl and 1988 Holiday Bowl aided by two Hall of Fame running backs, Thurman Thomas and Barry Sanders. He also led OSU to two 10-win seasons.