Barty co-starred with Mickey Rooney in the Mickey McGuire shorts, a comedy series of the 1920s and 1930s based on the Toonerville Folks comics. Small for his age even then, Barty would impersonate very young children alongside brawny authority figures or wild animals, making these threats seem even larger by comparison.

Barty was born October 25, 1924 in Millsboro, Pennsylvania, the son of Albert Steven and Ellen Cecial Bertanzetti His paternal grandfather was Italian.

In the 1933 film Gold Diggers of 1933, a nine-year-old Barty appeared as a baby who escapes from his stroller. He also appeared as The Child in the 1933 film Footlight Parade. He is briefly seen in the 1935 film Bride of Frankenstein, in an uncredited role as a baby in one of Dr. Pretorius' experiments, although his close-ups were cut out of the picture.

Barty was a noted Activist for the promotion of rights for others with dwarfism. He was disappointed with contemporary Hervé Villechaize's insistence that they were "midgets" instead of actors with dwarfism. Barty founded the Little People of America organization to help people with dwarfism in 1957 when he called upon people of short stature to join him in a get-together in Reno, Nevada. That original meeting of 21 people grew into Little People of America, a group which as of 2010 has more than 6,800 members. It was the first North American organization for little people.

Barty appeared several times on The Dennis Day Show, including once as a leprechaun. Beginning in 1958, he played pool hustler Babby, an occasional "information resource", in eight episodes of the Peter Gunn TV series. Barty starred in the Rawhide episode "Prairie Elephant" in 1961.

Barty also starred in a local Southern California children's show, Billy Barty's Bigtop, in the mid-1960s, which regularly showed The Three Stooges shorts. In one program, Stooge Moe Howard visited the set as a surprise guest. The program gave many Los Angeles area children their first opportunity to become familiar with little people, who until then had been rarely seen on the screen except as two-dimensional curiosities. He also appeared as a guest host on KTTV's Sheriff John's Lunch Brigade whenever "Sheriff John" Rovick was on vacation.

In 1962, he married Shirley Bolingbroke of Malad City, Idaho. They had two children, Lori Neilson and TV/film Producer and Director Braden Barty.

Barty also starred as "Sparky the Firefly" in the popular children's television shows The Bugaloos from 1970 to 1972 and as "Sigmund" in Sigmund and the Sea Monsters produced by Sid Krofft and Marty Krofft from 1974 to 1976. Barty played as Toulouse Lautrec in the 1972 The Brady Bunch Saturday morning cartoons preview special The Brady Bunch Meet ABC's Saturday Superstars. Barty played the evil sidekick on the 1970s Saturday morning TV series Dr. Shrinker, and was a regular cast member of Comedian Redd Foxx's variety show The Redd Foxx Show. Barty appeared in an episode of Barney Miller in 1977 & The Love Boat in 1978. Another show he guest-starred in was CHiPs. In June 1978, Barty guest-starred in the final episode of Man from Atlantis entitled "Deadly Carnival". He also guest starred in two episodes of Little House On The Prairie playing a circus member in the episode "Annabelle". Also in a later episode as a single dad trying to raise a baby daughter. Barty was regularly seen on Bizarre, a weekly Canadian TV Sketch comedy series, airing from 1980 to 1985.

Billy appeared on a 1971 episode of Celebrity Bowling paired with Dick Martin, defeating John Schuck and Michael Ansara, 120-118.

In 1981, Barty received a motion pictures star on the Hollywood Walk of Fame at 6922 Hollywood Boulevard for his contributions to the film industry.

In 1983, Barty supplied the voice for "Figment" in EPCOT Center's Journey Into Imagination dark ride. He subsequently supplied a reprisal for the second incarnation, though very brief.

In 1990, Barty was sued in small claims court by two of the Writers of his cancelled comedy television series Short Ribbs, which aired for 13 weeks in the autumn of 1989 as a local program on KDOC-TV. Producer and Writer william Winckler and Writer Warren Taylor filed separate lawsuits against Barty for money owed, and Barty lost both cases. Barty claimed the lawsuit news was the most publicity he ever got, and compared it to similar press that Celebrity Zsa Zsa Gabor received for slapping a Beverly Hills police officer.

Barty died of heart failure in 2000 at age 76. He is entombed in Glendale's Forest Lawn Memorial Park Cemetery.

In December 2002, a book on Barty's life titled Within Reach: An Inspirational Journey into the Life, Legacy and Influence of Billy Barty. The book was authored by Barty's nephew, Michael Copeland, and Copeland's wife Debra.