Bierce was born in a log cabin at Horse Cave Creek in Meigs County, Ohio, on June 24, 1842, to Marcus Aurelius Bierce (1799–1876) and Laura Sherwood Bierce. He was of entirely English ancestry, all of which came to North America between 1620 and 1640 as part of the Great Puritan Migration. He often wrote critically of both "Puritan values" and people who "made a fuss" about genealogy. He was the tenth of thirteen children, whose father gave all names beginning with the letter "A": in order of birth, the Bierce siblings were Abigail, Amelia, Ann, Addison, Aurelius, Augustus, Almeda, Andrew, Albert, and Ambrose. His mother was a descendant of william Bradford.

At the outset of the American Civil War, Bierce enlisted in the Union Army's 9th Indiana Infantry. He participated in the operations in Western Virginia (1861), was present at the Battle of Philippi (the first organized land action of the war), and received newspaper attention for his daring rescue, under fire, of a gravely wounded comrade at the Battle of Rich Mountain. In February 1862 he was commissioned a first lieutenant, and served on the staff of General william Babcock Hazen as a topographical Engineer, making maps of likely battlefields.

Bierce fought at the Battle of Shiloh (April 1862), a terrifying experience that became a source for several short stories and the memoir "What I Saw of Shiloh". As a staff officer, Bierce became known to leading generals such as George H. Thomas and Oliver O. Howard, both of whom supported his application for admission to West Point in May 1864. General Hazen believed Bierce would graduate from the military academy "with distinction" and william T. Sherman also endorsed the application for admission even though stating he had no personal acquaintance with Bierce. In June 1864, Bierce sustained a serious head wound at the Battle of Kennesaw Mountain, and spent the rest of the summer on furlough, returning to active duty in September. He was discharged from the army in January 1865.

His military career resumed, however, in mid-1866, when he joined General Hazen as part of an expedition to inspect military outposts across the Great Plains. The expedition traveled by horseback and wagon from Omaha, Nebraska, arriving toward year's end in San Francisco, California.

Bierce married Mary Ellen "Mollie" Day on December 25, 1871. They had three children: sons Day (1872–1889) and Leigh (1874–1901) and daughter Helen (1875–1940). Both of Bierce's sons died before he did. Day committed suicide after a romantic rejection, and Leigh died of pneumonia related to alcoholism. Bierce separated from his wife in 1888, after discovering compromising letters to her from an admirer. They divorced in 1904. Mollie Day Bierce died the following year.

Bierce lived and wrote in England from 1872 to 1875, contributing to Fun magazine. His first book, The Fiend's Delight, a compilation of his articles, was published in London in 1873 by John Camden Hotten under the pseudonym "Dod Grile".

Returning to the United States, he again took up residence in San Francisco. From 1879 to 1880, he traveled to Rockerville and Deadwood in the Dakota Territory, to try his hand as local manager for a New York mining company. When the company failed he returned to San Francisco and resumed his career in journalism.

From January 1, 1881 until September 11, 1885 he was Editor of The Wasp magazine, in which he began a column titled "Prattle". He also became one of the first regular columnists and editorialists on william Randolph Hearst's newspaper, The San Francisco Examiner, eventually becoming one of the most prominent and influential Writers and journalists of the West Coast. He remained associated with Hearst Newspapers until 1909.

During his lifetime, Bierce was better known as a Journalist than as a fiction Writer. His most popular stories were written in rapid succession between 1888 and 1891, in what was characterized as "a tremendous burst of consummate art". Bierce's works often highlight the inscrutability of the universe and the absurdity of death.

In January 1896 Hearst dispatched Bierce to Washington, D.C. to foil this attempt. The essence of the plot was secrecy; the railroads' advocates hoped to get the bill through Congress without any public notice or hearings. When the angered Huntington confronted Bierce on the steps of the Capitol and told Bierce to name his price, Bierce's answer ended up in newspapers nationwide: "My price is one hundred thirty million dollars. If, when you are ready to pay, I happen to be out of town, you may hand it over to my friend, the Treasurer of the United States."

Because of his penchant for biting social criticism and satire, Bierce's long newspaper career was often steeped in controversy. On several occasions his columns stirred up a storm of hostile reaction, which created difficulties for Hearst. One of the most notable of these incidents occurred following the assassination of President william McKinley, when Hearst's opponents turned a poem Bierce had written about the assassination of Governor william Goebel of Kentucky in 1900 into a cause célèbre.

Bierce meant his poem to express a national mood of dismay and fear, but after McKinley was shot in 1901, it seemed to foreshadow the crime:

One of Bierce's most famous works is his much-quoted The Devil's Dictionary, originally an occasional newspaper item, first published in book form in 1906 as The Cynic's Word Book. Described as "howlingly funny", it consists of satirical definitions of English words which lampoon cant and political double-talk. Bierce edited the twelve volumes of The Collected Works of Ambrose Bierce, which were published from 1909 to 1912. The seventh volume consists solely of The Devil's Dictionary.

Bierce is known to have accompanied Villa's army as far as the city of Chihuahua. His last known communication with the world was a letter he wrote there to Blanche Partington, a close friend, dated December 26, 1913. After closing this letter by saying, "As to me, I leave here tomorrow for an unknown destination," he vanished without a trace, his disappearance becoming one of the most famous in American literary history. Skeptic Joe Nickell argued that no letter had ever been found; all that existed was a notebook belonging to his secretary and companion, Carrie Christiansen, containing a rough summary of a purported letter and her statement that the originals had been destroyed.

Actor James Lanphier (1920-1969) played Bierce, with James Hampton as william Randolph Hearst, in the 1964 episode "The Paper Dynasty", of the syndicated western television series Death Valley Days, hosted by Stanley Andrews. In the story line, Hearst struggles to turn a profit despite increased circulation of The San Francisco Examiner. Robert O. Cornthwaite appears as Sam Chamberlain.

At least three films have been made of Bierce's story "An Occurrence at Owl Creek Bridge". A silent film version, The Bridge, was made in 1929. A French version called La Rivière du Hibou, directed by Robert Enrico, was released in 1962; this black-and-white film faithfully recounts the original narrative using voiceover. It aired in 1964 on American television as one of the final episodes of the television series The Twilight Zone: "An Occurrence at Owl Creek Bridge". Prior to The Twilight Zone, the story had been adapted as an episode of Alfred Hitchcock Presents. Another version, directed by Brian James Egen, was released in 2005. It was also adapted for the CBS radio programs Suspense and Escape.

Bierce's disappearance and trip to Mexico provide the background for the vampire horror film From Dusk Till Dawn 3: The Hangman's Daughter (2000), in which Bierce's character plays a central role. Bierce's fate is the subject of Gerald Kersh's "The Oxoxoco Bottle" (aka "The Secret of the Bottle"), which appeared in The Saturday Evening Post on December 7, 1957, and was reprinted in the anthology Men Without Bones. Bierce reappears in the Future on Mount Shasta in Robert Heinlein's novella, "Lost Legacy".

Carlos Fuentes's novel The Old Gringo is a fictionalized account of Bierce's disappearance; it was later adapted into the film Old Gringo (1989), starring Gregory Peck in the title role. Fuentes stated: "What started this novel was my admiration for Ambrose Bierce and for his Tales of Soldiers and Civilians."

Two adaptations were made of Bierce's story "Eyes of the Panther". One version was developed for Shelley Duvall's Nightmare Classics series and was released in 1990. It runs about 60 minutes. A shorter version was released in 2007 by Director Michael Barton and runs about 23 minutes.

Bierce was a major character in a series of mystery books written by Oakley Hall and published between 1998 and 2006.

The short film "Ah! Silenciosa" (1999), starring Jim Beaver as Bierce, weaves elements of "An Occurrence at Owl Creek Bridge" into a speculation on Bierce's disappearance.

In the fall of 2001, An Occurrence Remembered, a theatrical retelling of Bierce's An Occurrence At Owl Creek Bridge and Chickamauga, premiered off-Broadway in New York City under the production and direction of Lorin Morgan-Richards and lead Choreographer Nicole Cavaliere.

Hearst was thereby accused by rival newspapers—and by then-Secretary of State Elihu Root—of having called for McKinley's assassination. Despite a national uproar that ended his ambitions for the presidency (and even his membership in the Bohemian Club), Hearst kept employing Bierce.

Ambrose Bierce features as a character in Winston Groom's 2016 novel El Paso. In the novel, Bierce is personally executed by Pancho Villa.