Douglass North was born in Cambridge, Massachusetts, on November 5, 1920. He moved several times as a child due to his father's work at MetLife. The family lived in Ottawa, Lausanne, New York City, and Wallingford, Connecticut.

North was educated at Ashbury College in Ottawa, Ontario and the Choate School in Wallingford, Connecticut. He was accepted at Harvard at the same time that his father became the head of MetLife on the west coast, so North opted to go to University of California, Berkeley. In 1942, he graduated with a B.A. in General Curriculum-Humanities. Although his grades amounted to slightly better than a "C" average, he managed to complete a triple major in political science, philosophy and economics.

From 1951–56, North was an assistant professor of economics at the University of Washington, then from 1956–1960, an associate professor. In 1960 North became co-editor of the Journal of Economic History, popularizing Cliometrics (New Economic History), and from 1960–1983 he was Professor of Economics at the University of Washington where he also served as the chair of the economics department from 1967–79. In 1979 he served as the Peterkin Professor of Political Economy at Rice University, and in 1981–82 as the Pitt Professor of American History and Institutions at Cambridge University, before joining the faculty of Washington University in Saint Louis in 1983 as the Henry R. Luce Professor of Law and Liberty in the Department of Economics (where he also served as Director of the Center for Political Economy from 1984 to 1990). He was the Bartlett Burnap Senior Fellow at the Hoover Institution at Stanford University.

North returned to UC Berkeley to pursue a PhD in economics. He finished his studies in 1952 as he began work as an assistant professor at the University of Washington.

As a Nobel prize winner, North's reputation extended both from his own university environment to the international influences made by his research and writing. North's research in New Economic History has included such notable economists and historians as Jonathan Hughes, Richard Sutch, Lloyd Mercer, Jim Sheperd, Donald Gordon, Gary Walton, Lance E. Davis, Robert Huttenback, Roger Ransom, Gaston Rimlinger, Terry L. Anderson, P.J. Hill, Philip Coelho, and David Knowles as recorded in the 60th Anniversary dedication volume in memory of North.

Section 2 of North's 1991 paper describes the economic development of societies as occurring in stages:

In a 1992 paper, North argues that neoclassical economic theory overlooks the institutions required to create efficient markets with low monitoring and transaction costs. He develops a framework for explaining how institutions change and become more efficient over time.

Along with Ronald Coase and Oliver Williamson, he helped found the International Society for the New Institutional Economics (ISNIE) which held its first meeting in St. Louis in 1997. His research included property rights, transaction costs, the institutional basis of markets, and economic organization in history as well as economic development in developing countries.

In Violence and the Rise of Open-Access Orders, North, Wallis, and Weingast integrate a theory of politics with a theory of economics to explain the institutions, i.e. the rules governing behavior, that develop in human societies. In their view, the primary task of any set of institutions is to limit violence among individuals. They focus on two sets of institutions—which they call social orders—that accomplish this task, but which also have different effects on economic growth.

North died on November 23, 2015, at his summer home in Benzonia, Michigan from esophageal cancer at the age of 95.