Ernest Walton was born in Abbeyside, Dungarvan, County Waterford to a Methodist minister father, Rev John Walton (1874–1936) and Anna Sinton (1874–1906). In those days a general clergyman's family moved once every three years, and this practice carried Ernest and his family, while he was a small child, to Rathkeale, County Limerick (where his mother died) and to County Monaghan. He attended day schools in counties Down and Tyrone, and at Wesley College Dublin before becoming a boarder at Methodist College Belfast in 1915, where he excelled in science and mathematics.

In 1922 Walton won scholarships to Trinity College, Dublin for the study of mathematics and science. He was awarded bachelor's and master's degrees from Trinity in 1926 and 1927, respectively. During these years at college, Walton received numerous prizes for excellence in physics and mathematics (seven prizes in all), including the Foundation Scholarship in 1924. Following graduation he was awarded an 1851 Research Fellowship from the Royal Commission for the Exhibition of 1851 and was accepted as a research student at Trinity College, Cambridge, under the supervision of Sir Ernest Rutherford, Director of Cambridge University's Cavendish Laboratory. At the time there were four Nobel Prize laureates on the staff at the Cavendish lab and a further five were to emerge, including Walton and John Cockcroft. Walton was awarded his PhD in 1931 and remained at Cambridge as a researcher until 1934.

During the early 1930s Walton and John Cockcroft collaborated to build an apparatus that split the nuclei of lithium atoms by bombarding them with a stream of protons accelerated inside a high-voltage tube (700 kilovolts). The splitting of the lithium nuclei produced helium nuclei. This was experimental verification of theories about atomic structure that had been proposed earlier by Rutherford, George Gamow, and others. The successful apparatus – a type of particle accelerator now called the Cockcroft-Walton generator – helped to usher in an era of particle-accelerator-based experimental nuclear physics. It was this research at Cambridge in the early 1930s that won Walton and Cockcroft the Nobel Prize in physics in 1951.

Ernest Walton married Freda Wilson (1903–1983), daughter of an Irish Methodist minister, on 23 August 1934. They had five children, Dr Alan Walton (college lecturer in physics, Magdalene College, Cambridge), Mrs Marian Woods, Professor Philip Walton, Professor of Applied Physics, National University of Ireland, Galway, Jean Clarke and Winifred Walton. He was a longtime member of the board of governors of Wesley College, Dublin.

Walton and Cockcroft received the Hughes Medal of the Royal Society of London in 1938. In much later years – and predominantly after his retirement in 1974 – Walton received honorary degrees or conferrals from numerous Irish, British, and North American institutions.

Walton and John Cockcroft were recipients of the 1951 Nobel Prize in Physics for their "work on the transmutation of the atomic nuclei by artificially accelerated atomic particles" (popularly known as splitting the atom). They are credited with being the first to disintegrate the lithium nucleus by bombardment with accelerated protons (or hydrogen nuclei) and identifying helium nuclei in the products in 1930. More generally, they had built an apparatus which showed that nuclei of various lightweight elements (such as lithium) could be split by fast-moving protons.

Walton was associated with the Dublin Institute for Advanced Studies for over 40 years, e,g., serving long periods on the board of the School of Cosmic Physics and on the Council of the Institute. Following the 1952 death of John J. Nolan, the inaugural chairman of the School of Cosmic Physics, Walton assumed the role, and served in that position until 1960, when he was succeeded by John H. Poole.

The "Walton Causeway Park" in Walton's native Dungarvan was dedicated in his honour with Walton himself attending the ceremony in 1989. After his death the Waterford Institute of Technology named a large building the ETS Walton Building and a plaque was placed on the site of his birthplace.

Although he retired from Trinity College Dublin in 1974, he retained his association with the Physics Department at Trinity up to his final illness. His was a familiar face in the tea-room. Shortly before his death he marked his lifelong devotion to Trinity by presenting his Nobel medal and citation to the college. Ernest Walton died in Belfast on 25 June 1995, aged 91. He is buried in Deansgrange Cemetery, Dublin.