Berkeley was born in Los Angeles, California, to Francis Enos (who died when Busby was eight) and stage Actress Gertrude Berkeley (1864–1946). Among Gertrude's friends, and a performer in Tim Frawly's Stock company run by Busby Berkeley's father, were Actress Amy Busby from which Berkeley gained the appellation "Buzz" or "Busby" and actor william Gillette, then only four years away from playing Sherlock Holmes. Whether he was actually christened Busby Berkeley william Enos, or Berkeley william Enos, with "Busby" being a nickname, is not unanimous – the "Child's names" entry on his birth certificate is blank.

In addition to her stage work, Gertrude played mother roles in silent films while Berkeley was still a child. Berkeley made his stage début at five, acting in the company of his performing family. In 1917, he lived in Athol, Massachusetts, working as an advertising and sales manager. During World War I, Berkeley served as a field artillery lieutenant. Watching Soldiers drill may have inspired his later complex choreography. During the 1920s, Berkeley was a dance Director for nearly two dozen Broadway musicals, including such hits as A Connecticut Yankee. As a Choreographer, Berkeley was less concerned with the terpsichorean skill of his chorus girls as he was with their ability to form themselves into attractive geometric patterns. His musical numbers were among the largest and best-regimented on Broadway.

His earliest film work was in Samuel Goldwyn's Eddie Cantor musicals, where he began developing such techniques as a "parade of faces" (individualizing each chorus girl with a loving close-up), and moving his Dancers all over the stage (and often beyond) in as many kaleidoscopic patterns as possible. Berkeley's top shot technique (the kaleidoscope again, this time shot from overhead) appeared seminally in the Cantor films, and also the 1932 Universal drama film Night World (where he choreographed the number "Who's Your Little Who-Zis?"). His numbers were known for starting out in the realm of the stage, but quickly exceeding this space by moving into a time and place that could only be cinematic, only to return to shots of an applauding audience and the fall of a curtain. As Choreographer, Berkeley was allowed a certain degree of independence in his direction of musical numbers, and they were often markedly distinct from (and sometimes in contrast to) the narrative sections of the films. The numbers he choreographed were mostly upbeat and focused on decoration as opposed to substance; one exception to this is the number "Remember My Forgotten Man" from Gold Diggers of 1933, which dealt with the treatment of World War I veterans during The Great Depression.

Berkeley's popularity with an entertainment-hungry Great Depression audience was secured when he choreographed four musicals back-to-back for Warner Bros.: 42nd Street, Footlight Parade, the aforementioned Gold Diggers of 1933, Dames, and Fashions of 1934, as well as In Caliente and Wonder Bar with Dolores del Río. Berkeley always denied any deep significance to his work, arguing that his main professional goals were to constantly top himself and to never repeat his past accomplishments.

In September 1935, Berkeley was the driver responsible for an automobile accident in which two people were killed, five seriously injured; Berkeley himself was badly cut and bruised. Berkeley, brought to court on a stretcher, heard testimony that Time magazine said made him wince:

Berkeley was married six times and was survived by his wife Etta Dunn. He was also involved in an alienation of affections lawsuit in 1938 involving Carole Landis.

As the outsized musicals in which Berkeley specialized became passé, he turned to straight directing. The result was 1939's They Made Me a Criminal, one of John Garfield's best films. Berkeley had several well-publicized run-ins with MGM stars such as Judy Garland. In 1943, he was removed as Director of Girl Crazy because of disagreements with Garland, although the lavish musical number "I Got Rhythm", which he directed, remained in the picture.

His next stop was at 20th Century-Fox for 1943's The Gang's All Here, in which Berkeley choreographed Carmen Miranda's "Lady in the Tutti-Frutti Hat" number. The film made money, but Berkeley and the Fox brass disagreed over budget matters. Berkeley returned to MGM in the late 1940s, where among many other accomplishments he conceived the Technicolor finales for the studio's Esther Williams films. Berkeley's final film as Choreographer was MGM's Billy Rose's Jumbo (1962).

In the late 1960s, the camp craze brought the Berkeley musicals back to the forefront. He toured the college and lecture circuit, and even directed a 1930s-style cold medication commercial, complete with a top shot of a dancing clock. In his 75th year, Berkeley returned to Broadway to direct a successful revival of No No Nanette starring his old Warner Brothers colleague and "42nd Street" star Ruby Keeler; both also played cameos in the 1970 film The Phynx the same year.

Berkeley died on March 14, 1976 in Palm Springs, California at the age of 80 from natural causes. He is buried in the Desert Memorial Park in Cathedral City, California.

Berkeley was inducted into the National Museum of Dance's Mr. & Mrs. Cornelius Vanderbilt Whitney Hall of Fame in 1988.