Wilson was born in the parish of Glencorse, Midlothian to Annie Clark Harper and John Wilson, a sheep farmer. After his father died in 1873, he moved with his family to Manchester. With financial support from his step-brother he studied biology at Owens College, now the University of Manchester, with the intent of becoming a Doctor. In 1887, he graduated from the College with a BSc. He won a scholarship to attend Sidney Sussex College, Cambridge where he became interested in physics and chemistry. In 1892 he received 1st class honours in both parts of the Natural Science Tripos.

He became particularly interested in meteorology, and in 1893 he began to study clouds and their properties. Beginning in 1894, he worked for some time at the observatory on Ben Nevis, where he made observations of cloud formation. He was particularly fascinated by the appearance of glories. He then tried to reproduce this effect on a smaller scale at the Cavendish Laboratory in Cambridge, expanding humid air within a sealed container. He later experimented with the creation of cloud trails in his chamber by condensation onto ions generated by radioactivity. Several of his cloud chambers survive.

Wilson was elected a Fellow of the Royal Society (FRS) in 1900.

Wilson published numerous papers on meteorology and physics, on topics including X-rays, ionization, thundercloud formation, and other meteorological events. Wilson may also have observed a sprite in 1924, 65 years before their official discovery. Weather was a focus of Wilson's work throughout his career, from his early observations at Ben Nevis to his final paper, on thunderclouds.

For the invention of the cloud chamber he received the Nobel Prize in Physics in 1927, becoming the only Scottish-born person to do so. He shared this prize with Arthur Compton. Despite this great contribution to particle physics, he remained interested in atmospheric physics, specifically atmospheric electricity, for his entire career. For Example, his last research paper, published in 1956 when he was in his late eighties (at that time he was the oldest FRS to publish a paper in the Royal Society's journals), was on atmospheric electricity.

In 1908, Wilson married Jessie Fraser, the daughter of a minister from Glasgow. The couple had four children. His family knew him as patient and curious, and fond of taking walks in the hills near his home. He died at his home in Carlops on 15 November 1959, surrounded by his family.

In 2012, the Royal Society of Edinburgh held a meeting in honor of Wilson, the "Great Scottish Physicist".