Fairbanks was born Douglas Elton Thomas Ullman (spelled "Ulman" by Douglas Fairbanks Jr. in his memoirs) in Denver, Colorado, the son of Hezekiah Charles Ullman (September 15, 1833- February 23, 1915) and Ella Adelaide (née Marsh; 1847-1915). He had two half-brothers, John Fairbanks, Jr. (born 1873) and Norris Wilcox (February 20, 1876 - October 21, 1946), and a full brother, Robert Payne Ullman (March 13, 1882 – February 22, 1948). His father was born in Berrysburg, Pennsylvania, but raised in Williamsport. He was the fourth child in a Jewish family consisting of six sons and four daughters. Charles's parents, Lazarus Ullman and Lydia Abrahams, had immigrated to the U.S. in 1830 from Baden, Germany.

Distraught and lonely, she met and married a courtly Georgian, Edward Wilcox, who turned out to be an alcoholic. After they had a son, Norris, she divorced Wilcox with Charles acting as her own Lawyer in the suit. The pretty southern belle soon became romantically involved with Charles and agreed to move to Denver with him to pursue mining Investments. They arrived in Denver in 1881 with her son, John. (Norris was left in Georgia with relatives and was never sent for by his mother.) They were married and in 1882 had a child, Robert and then a second son, Douglas, a year later. Charles purchased several mining interests in the Rocky Mountains, and he re-established his law practice. Charles Ullman, after hearing of his wife's philandering, abandoned the family when Douglas was five years old. Douglas and his older brother Robert were brought up by their mother, who gave them the family name Fairbanks, after her first husband.

He left school in the spring of 1899, at the age of 15. He variously claimed to have attended Colorado School of Mines and Harvard University, but neither claim is true. He went with the acting troupe of Frederick Warde, beginning a cross country tour in September 1899. He toured with Warde for two seasons, functioning in dual roles, both as actor and as the assistant stage manager in his second year with the group.

After two years he moved to New York, where he found his first Broadway role in Her Lord and Master, which premiered in February 1902. He worked in a hardware store and as a clerk in a Wall Street office between acting jobs. His Broadway appearances included the popular A Gentleman from Mississippi in 1908-09. On July 11, 1907, Fairbanks married Anna Beth Sully, the daughter of wealthy industrialist Daniel J. Sully, in Watch Hill, Rhode Island. They had one son, Douglas Fairbanks Jr., also a noted actor. In 1915, the family moved to Los Angeles.

Though widely considered as one of the biggest stars in Hollywood during the 1910s and 1920s, Fairbanks' career rapidly declined with the advent of the "talkies". His final film was The Private Life of Don Juan (1934).

After moving to Los Angeles, Fairbanks signed a contract with Triangle Pictures in 1915 and began working under the supervision of D.W. Griffith. His first film was titled The Lamb, in which he debuted the athletic abilities that would gain him wide attention among theatre audiences. His athleticism was not appreciated by Griffith, however, and he was brought to the attention of Anita Loos and John Emerson, who wrote and directed many of his early romantic comedies.

Fairbanks met Actress Mary Pickford at a party in 1916, and the couple soon began an affair. In 1917, they joined Fairbanks' friend Charlie Chaplin selling war bonds by train across the United States. Pickford and Chaplin were the two highest paid film stars in Hollywood at that time. To curtail these stars' astronomical salaries, the large studios attempted to monopolize distributors and exhibitors. By 1918, Fairbanks was Hollywood's most popular actor, and within three years of his arrival, Fairbanks' popularity and Business acumen raised him to the third-highest paid.

In 1917, Fairbanks capitalized on his rising popularity by publishing a self-help book, Laugh and Live which extolled the power of positive thinking and self-confidence in raising one's health, Business and social prospects.

To avoid being controlled by the studios and to protect their independence, Fairbanks, Pickford, Chaplin, and D. W. Griffith formed United Artists in 1919, which created their own distributorships and gave them complete artistic control over their films and the profits generated. The company was kept solvent in the years immediately after its formation largely by the success of Fairbanks' films.

By 1920, Fairbanks had completed twenty-nine films (twenty-eight features and one two-reel short), which showcased his ebullient screen persona and athletic ability. By 1920, he had the inspiration of staging a new type of adventure-costume picture, a genre that was then out of favor with the public; Fairbanks had been a comic in his previous films. In The Mark of Zorro, Fairbanks combined his appealing screen persona with the new adventurous costume element. It was a smash success and parlayed the actor into the rank of superstar. For the remainder of his career in silent films he continued to produce and star in ever more elaborate, impressive costume films, such as The Three Musketeers (1921), Douglas Fairbanks in Robin Hood (1922), The Thief of Bagdad (1924), The Black Pirate (1926), and The Gaucho (1927). Fairbanks spared no expense and effort in these films, which established the standard for all Future swashbuckling films.

In 1921, he, Pickford, Chaplin, and others, helped to organize the Motion Picture Fund to assist those in the industry who could not work, or were unable to meet their bills.

During the first ceremony of its type, on April 30, 1927, Fairbanks and Pickford placed their hand and foot prints in wet cement at the newly opened Grauman's Chinese Theatre in Hollywood. (In the classic comedy Blazing Saddles, Harvey Korman's villain character sees Fairbanks' prints at Grauman's and exclaims, "How do he do such fantastic Stunts...with such little feet?")

Recently, due to his involvement with the USC Fencing Club, a bronze statue of Fairbanks was erected in the Academy of Motion Picture Arts & Sciences Courtyard of the new School of Cinematic Arts building on the University of Southern California campus. Fairbanks was a key figure in the film school's founding in 1929, and in its curriculum development.

Fairbanks and Pickford separated in 1933, after he began an affair with Sylvia, Lady Ashley. They divorced in 1936, with Pickford keeping the Pickfair estate. Fairbanks and Ashley were married in Paris in March 1936.

On December 12, 1939, Fairbanks suffered a heart attack. He died later that day at his home in Santa Monica at the age of 56. His last words were reportedly, "I've never felt better." His funeral Service was held at the Wee Kirk o' the Heather Church in Glendale's Forest Lawn Memorial Park Cemetery where he was placed in a crypt in the Great Mausoleum.

Two years following his death, he was removed from Forest Lawn by his widow, Sylvia, who commissioned an elaborate marble monument for him featuring a long rectangular reflecting pool, raised tomb, and classic Greek architecture in Hollywood Forever Cemetery in Los Angeles. The monument was dedicated in a ceremony held in October 1941, with Fairbanks's close friend Charlie Chaplin reading a remembrance. The remains of his son, Douglas Fairbanks Jr., were also interred there upon his death in May 2000.

In 1998, a group of Fairbanks fans started the Douglas Fairbanks Museum in Austin, Texas. The museum building was temporarily closed for mold remediation and repairs in February 2010.

In 2002, AMPAS opened the "Fairbanks Center for Motion Picture Study" located at 333 S. La Cienega Boulevard in Beverly Hills. The building houses the Margaret Herrick Library.

On November 6, 2008, the Academy of Motion Picture Arts and Sciences celebrated the publication of their "Academy Imprints" book Douglas Fairbanks, authored by film Historian Jeffrey Vance, with the screening of a new restoration print of The Gaucho with Vance introducing the film.

The following year, opening January 24, 2009, AMPAS mounted a major Douglas Fairbanks exhibition at their Fourth Floor Gallery titled, "Douglas Fairbanks: The First King of Hollywood." The exhibit featured costumes, props, pictures, and documents from his career and personal life. In addition to the exhibit, AMPAS screened The Thief of Bagdad and The Iron Mask in March 2009. Concurrently with the Academy's efforts, the Museum of Modern of Art held their first Fairbanks film retrospective in over six decades, titled "Laugh and Live: The Films of Douglas Fairbanks" which ran from December 17, 2008 – January 12, 2009. Jeffrey Vance opened the retrospective with a lecture and screening of the restoration print of The Gaucho.

The 2011 film The Artist was loosely based on Fairbanks, with the film's lead portraying Zorro in a silent movie featuring a scene from the Fairbanks version. While thanking the audience in 2012 for a Golden Globe award as Best Actor for his performance in the film, actor Jean Dujardin added, "As Douglas Fairbanks would say," then moved his lips silently as a comedic homage. When Dujardin accepted the 2011 Academy Award for Best Actor in a Leading Role, Fairbanks was cited at length as the main inspiration for Dujardin's performance in The Artist.

An important accolade given to the Douglas Fairbanks legacy was a special screening of his masterpiece, The Thief of Bagdad, at the 2012 edition of the Turner Classic Movies Film Festival. On April 15, 2012, the festival concluded with a sold-out screening of the Fairbanks film held at the historic Egyptian Theatre in Hollywood. The evening was introduced by TCM host Ben Mankiewicz and Fairbanks biographer Jeffrey Vance.