Damon Runyon was born Alfred Damon Runyan to Alfred Lee and Elizabeth (Damon) Runyan. His relatives in his birthplace of Manhattan, Kansas included several newspapermen. His grandfather was a newspaper printer from New Jersey who had relocated to Manhattan, Kansas in 1855, and his father was Editor of his own newspaper in the town. In 1882 Runyon's father was forced to sell his newspaper, and the family moved westward. The family eventually settled in Pueblo, Colorado in 1887, where Runyon spent the rest of his youth. By most accounts, he attended school only through the fourth grade. He began to work in the newspaper trade under his father in Pueblo. In present-day Pueblo, Runyon Field, the Damon Runyon Repertory Theater Company, and Runyon Lake are named in his honor.

In 1898, when still in his teens, Runyon enlisted in the U.S. Army to fight in the Spanish–American War. While in the Service, he was assigned to write for the Manila Freedom and Soldier's Letter.

After his military Service, he worked for various Colorado newspapers, beginning in Pueblo. His first job as a reporter was in September 1900, when he was hired by the Pueblo Star; he then worked in the Rocky Mountain area during the first decade of the 1900s: at the Denver Daily News, he served as "sporting editor" (what would today be called "sports editor") and then worked as a staff Writer. His expertise was in covering the semi-professional teams in Colorado; he even briefly managed a semi-pro team in Trinidad, Colorado. At one of the newspapers where he worked, the spelling of his last name was changed from "Runyan" to "Runyon", a change he let stand.

After a notable failure in trying to organize a Colorado minor baseball league, which lasted less than a week, Runyon moved to New York City in 1910. In his first New York byline, the American Editor dropped the "Alfred" and the name "Damon Runyon" appeared for the first time. For the next ten years he covered the New York Giants and professional boxing for the New York American.

He was the Hearst newspapers' baseball columnist for many years, beginning in 1911, and his knack for spotting the eccentric and the unusual, on the field or in the stands, is credited with revolutionizing the way baseball was covered. Perhaps as confirmation, Runyon was inducted into the writers' wing (the J. G. Taylor Spink Award) of the Baseball Hall of Fame in 1967. He is also a member of the International Boxing Hall Of Fame and is known for dubbing heavyweight champion James J. Braddock, the "Cinderella Man". Runyon frequently contributed Sports poems to the American on boxing and baseball themes, and also wrote numerous short stories and essays.

Runyon's marriage to Ellen Egan produced two children (Mary and Damon, Jr.), but broke up in 1928 over rumors that Runyon had become infatuated with Patrice Amati del Grande, a Mexican woman he had first met while covering the Pancho Villa raids in 1916 and discovered once again in New York, when she called the American seeking him out. Runyon had promised her in Mexico that if she would complete the education he paid for her, he would find her a dancing job in New York. She became his companion after he separated from his wife. After Ellen Runyon's death, Runyon and del Grande married on July 7, 1932; that marriage ended in 1946 when she left him for a younger man.

Runyon was also a well-known newspaper reporter, covering Sports and general news for decades for various publications and syndicates owned by william Randolph Hearst. Already famous for his fiction, he wrote a well-remembered "present tense" article on Franklin Delano Roosevelt's Presidential inauguration in 1933 for the Universal Service, a Hearst syndicate, which was merged with the co-owned International News Service in 1937.

Runyon died in New York City from throat cancer in late 1946, at age 66. His body was cremated, and his ashes were illegally scattered from a DC-3 airplane over Broadway in Manhattan by Captain Eddie Rickenbacker on December 18, 1946. The family plot of Damon Runyon is located at Woodlawn Cemetery in The Bronx, New York.

The Damon Runyon Theater radio series dramatized 52 of Runyon's short stories in weekly broadcasts running from October 1948 to September 1949 (with reruns until 1951). The series was produced by Alan Ladd's Mayfair Transcription Company for syndication to local radio stations. John Brown played the character "Broadway", who doubled as host and narrator. The cast also comprised Alan Reed, Luis Van Rooten, Joseph Du Val, Gerald Mohr, Frank Lovejoy, Herb Vigran, Sheldon Leonard, william Conrad, Jeff Chandler, Lionel Stander, Sidney Miller, Olive Deering and Joe De Santis. Pat O'Brien was initially engaged for the role of "Broadway". The original stories were adapted for the radio by Russell Hughes.

Runyon's short stories are told in the first person by a protagonist who is never named, and whose role is unclear; he knows many Gangsters and does not appear to have a job, but he does not admit to any Criminal involvement, and seems to be largely a bystander. He describes himself as "being known to one and all as a guy who is just around". The Damon Runyon Theatre dramatized 52 of Runyon's works in 1949, and for these the protagonist was given the name "Broadway", although it was admitted that this was not his real name, much in the way "Harry the Horse" and "Sorrowful Jones" are aliases.

There are many collections of Runyon's stories: in particular Runyon on Broadway and Runyon from First to Last between them provide extensive coverage. The latter is claimed to contain all of Runyon's stories (i.e. fiction) not included in Runyon on Broadway. In fact, there are two Broadway stories originally published in Collier's Weekly but not included in either collection: "Maybe a Queen" and "Leopard's Spots", both collected in More Guys And Dolls (1950).

Damon Runyon Theatre aired on CBS-TV from 1955 to 1956.

Runyon's fictional world is also known to the general public through the musical Guys and Dolls based on two of his stories, "The Idyll of Miss Sarah Brown" and "Blood Pressure". The musical additionally borrows characters and story elements from a few other Runyon stories, most notably "Pick The Winner". The film Little Miss Marker (and its two remakes, Sorrowful Jones and the 1980 Little Miss Marker) grew from his short story of the same name.

Mike McShane told Runyon stories as monologues on British TV in 1994, and an accompanying book was released, both called Broadway Stories.