Santos-Dumont was born on 20 July 1873 in Cabangu in the Brazilian town of Palmira (today named Santos Dumont) in the state of Minas Gerais in southeast Brazil. He was youngest of the seven children born to Henrique Dumont, an Engineer of French descent, and Francisca de Paula Santos. Santos-Dumont's Father managed a coffee plantation on land owned by his wife's family, and later bought land in Ribeirão Preto on which he established a plantation of his own. His extensive use of labor-saving inventions earned him a fortune, and he was known for a time as the "Coffee King of Brazil."

In 1891 Santos-Dumont's Father was partially paralyzed by a fall from a horse. He sold the plantation and went to Europe with his wife and Santos-Dumont in search of treatment. In Paris, Santos-Dumont contacted a balloonist with the intention of making an ascent. The price quoted was 1,200 francs for a two-hour FLIGHT, plus payment for any damage caused and for returning the balloon to Paris. This was a considerable sum of money, and Santos-Dumont decided not to make the FLIGHT, reasoning that "If I risk 1,200 francs for an afternoon's pleasure I shall find it either good or bad. If it is bad the money will be lost. If it is good I shall want to repeat it and I shall not have the means." After this he bought a Peugeot automobile, which he took with him when he returned to Brazil with his parents at the end of the year.

In 1892 the family returned to Europe, but Henriques felt too ill to continue on to Paris from Lisbon, and Alberto made the journey on his own. His father's health deteriorated and he decided to return to Brazil, where he died on 30 August 1892.

For the next four years Alberto lived in Paris, studying physics, chemistry, mechanics, and electricity with the help of a private tutor, and returning to Brazil for short holidays. During this period he sold his Peugeot, replacing it with a more powerful and faster De Dion motor-tricycle. In 1896 he returned to Brazil for a longer period, but began to miss Paris and so returned to Europe in 1897. Before embarking he had bought a copy of an account of Salomon Andrée's attempt to fly to the North Pole by balloon, written by the constructors of the balloon, MM. Lachambre and Machuron. In his biography Santos-Dumont describes the book as "a revelation", and resolved to make contact with the balloon constructors when he reached Paris.

After numerous balloon flights, Santos-Dumont turned to the design of steerable balloons, or what became known as non-rigid airships, which could be propelled through the air rather than drifting along with the wind. A dirigible powered by an electric motor, La France, capable of flying at around 24 km/h (15 mph) had been successfully flown in 1884 by Charles Renard and Arthur Krebs, but their experiments had not progressed due to a lack of funding. His first design was wrecked during its second FLIGHT on 29 September 1898, and he had even less luck with his second, which was abandoned after his first attempt to fly it on 11 May 1899.

A major cause of the accidents to his first two airships had been loss of pressure causing the elongated envelope to lose shape, and for his third design he adopted a much shorter and fatter envelope shape, and towards the end of 1899 made a number of successful flights in it. Meanwhile, he had an airship shed complete with its own hydrogen generating plant constructed at the Aéro-Club de France's flying grounds in the Parc Saint Cloud.

On 19 October 1901, after several more attempts, Santos-Dumont succeeded in making the return FLIGHT. Immediately after he reached Saint-Cloud, a controversy broke out regarding the precise timing of the flight: although he had reached his destination in under 30 minutes there had been a delay of over a minute before his mooring line was picked up. However a satisfactory compromise was reached, and Santos-Dumont was eventually given the prize, which he announced would be given to the poor of Paris. An additional 125,000 francs along with a gold medal was voted to him by the government of his native Brazil.

Santos-Dumont, a lifelong bachelor, did seem to have a particular affection for a married Cuban-American woman named Aida de Acosta, who in 1903 became the only other person that he ever permitted to fly one of his airships – his No. 9 (and thereby most likely becoming the first woman to pilot a powered aircraft). Until the end of his life, he kept a picture of her on his desk alongside a vase of fresh flowers. Nonetheless, there is no indication that Santos-Dumont and Acosta stayed in touch after her flight; upon his death she was reported as saying that she hardly knew him.

In 1904, after Santos-Dumont complained to his friend Louis Cartier about the difficulty of checking his pocket watch during FLIGHT, Cartier created his first men's wristwatch, thus allowing Santos-Dumont to check his FLIGHT performance while keeping both hands on the controls. Cartier still markets a line of Santos-Dumont watches and sunglasses.

Although Santos-Dumont continued to work on non-rigid airships, his primary interest soon turned to heavier-than-air aircraft. By 1905, he had finished his first fixed-wing aircraft design, and also a helicopter. Santos-Dumont finally succeeded in flying a heavier-than-air aircraft on 23 October 1906, piloting the 14-bis before a large crowd of witnesses at the grounds of Paris' Château de Bagatelle in the Bois de Boulogne for a distance of 60 metres (197 ft) at a height of about five meters (16 ft). This was the first FLIGHT of a powered heavier-than-air machine in Europe to be certified by the Aéro-Club de France, and won the Deutsch-Archdeacon Prize for the first officially observed FLIGHT of more than 25 meters. On 12 November 1906 Santos-Dumont set the first world record recognized by the Federation Aeronautique Internationale, by flying 220 metres (722 ft) in 21.5 seconds.

In 1908 Santos-Dumont started working with Adolphe Clément's Clement-Bayard company to mass-produce the Demoiselle No 19. They planned a production run of 100 units, built 50 but sold only 15, for 7,500 francs for each airframe. It was the world's first series production aircraft. By 1909 it was offered with a choice of three engines: Clement 20 hp; Wright 4-cyl 30 hp (Clement-Bayard had the license to manufacture Wright engines) and Clement-Bayard 40 hp designed by Pierre Clerget. The Demoiselle could achieve a speed of 120 km/h.

In March 1910 Santos-Dumont announced that he was retiring from aviation. He secluded himself in his house and it was rumoured that he was suffering from a nervous breakdown caused by overwork, but it is probable that he was depressed about the multiple sclerosis from which he was later known to suffer.

In 1911 he moved to the French seaside village of Bénerville (now Benerville-sur-Mer), where he took up astronomy as a hobby. After the outbreak of war in 1914 his German-made telescope and unusual accent led to accusations he was a German spy tracking French naval activity, and his rooms searched by French police. Upset by the allegation and depressed about his illness Santos-Dumont burned all his papers and plans. For this reason there is little direct information available about his designs today. He spent much of the 1920s in Swiss and French sanatoria, though returning to Brazil at times.

In Brazil, Santos-Dumont bought a small lot on the side of a hill in the city of Petrópolis, in the mountains near Rio de Janeiro, and in 1918 built a small house there filled with imaginative mechanical gadgetry including an alcohol-fueled heated shower of his own design. The hill was purposefully chosen because of its great steepness as a proof that ingenuity could make it possible to build a comfortable house in that unlikely site. After building it, he used to spend his summers there to escape the heat in Rio, calling it A Encantada ("The Enchanted") after its street, Rua do Encanto. The treads of the exterior stairs are hollowed alternately on the right and left, to enable people to climb them comfortably. The house is now a museum.

For his arrival in Brazil in 1928, a dozen members of the Brazilian scientific community boarded a seaplane with the intention of paying a flying welcome to the returning aviator on the luxury liner Cap Arcona. The seaplane, however, crashed with the loss of all on board. The loss deepened Santos-Dumont's growing despondency, and he returned to Switzerland.

In 1931 Santos-Dumont's nephew went to Switzerland and brought him to Brazil. Seriously ill and said to be depressed over his multiple sclerosis and the use of aircraft in warfare during São Paulo's Constitutionalist Revolution, he hanged himself on 23 July 1932 in the city of Guarujá (although his death certificate gives the cause of death as "cardiac collapse").

However, upon arrival in St. Louis, Santos-Dumont found his airship’s envelope to be irreparably damaged. Sabotage, although suspected, was never proven. Santos-Dumont did not participate in the contest after suspicion of the deed, a repeat of a similar incident in London, began to focus on Santos-Dumont himself. He left the Fair and returned immediately to France.