Monash was born in Dudley Street, West Melbourne, Victoria, on 27 June 1865, the son of Louis Monash and his wife Bertha, née Manasse. He was born to Jewish parents, both from Krotoschin, in the Posen province, Kingdom of Prussia (now Krotoszyn in the Greater Poland Voivodeship, Poland); the family name was originally spelt Monasch (pronounced with the emphasis on the second syllable). The family spoke German as their native language. As might have been expected from a man brought up by cultivated German parents who had arrived in Australia barely two years before John's birth, Monash spoke, read, and wrote German fluently. However, from 1914 until his death, Sir John Monash had no good reason to attract attention to his German background.

In 1874, the family moved to the small town of Jerilderie in the Riverina region of New South Wales, where his Father ran a store. Monash later claimed to have met the bushranger Ned Kelly during his raid there in 1879. Monash attended the public school and his intelligence was recognised. The family was advised to move back to Melbourne to let John reach his full potential, and they moved back in 1877. He was educated under Alexander Morrison at Scotch College, Melbourne, where he passed the matriculation examination when only 14 years of age. At age 16, he was dux of the school. He graduated from the University of Melbourne: a Master of Engineering in 1893; a Bachelor of Arts and Bachelor of Laws in 1895, and a Doctor of Engineering in 1921.

Monash joined the university company of the militia in 1884, and he became a lieutenant in the North Melbourne battery in 1887. He was promoted to captain in 1895, major in 1897, and in 1906 he became a lieutenant-colonel in the intelligence corps. He was colonel commanding the 13th Infantry Brigade in 1912.

On 8 April 1891, Monash married Hannah Victoria Moss (1871–1920), and their only child, Bertha, was born in 1893. Monash had previously engaged in an affair with Annie Gabriel, the wife of one of his colleagues, which ended as an active matter after his conscious choice of 'Vic' for marriage (though communication continued many years afterwards). He worked as a civil Engineer, and played a major role in introducing reinforced concrete to Australian engineering practice. He initially worked for private contractors on bridge and railway construction, and as their advocate in contract arbitrations. Following a period with the Melbourne Harbour Trust, in 1894 he entered into partnership with J. T. N. Anderson as consultants and contractors. When the partnership was dissolved in 1905 he joined with the builder David Mitchell and industrial Chemist John Gibson to form the Reinforced Concrete & Monier Pipe Construction Co, and in 1906 with them and businessmen from South Australia, to form the S. A. Reinforced Concrete Co. He took a leading part in his profession and became President of the Victorian Institute of Engineers and a member of the Institution of Civil Engineers, London.

Charles Bean, the official Australian war Historian, noted that Monash was more effective the higher he rose within the Army, where he had greater capacity to use his skill for meticulous planning and organisation, and to innovate in the area of Technology and tactics. Bean had been no great admirer of Monash in his early career, in part due to a general prejudice against Monash's Prussian-Jewish background, but more particularly because Monash did not fit Bean's concept of the quintessential Australian character that Bean was in the process of mythologising in his monumental work Australia in the War of 1914–1918. (Both Bean and Monash, however, having seen the very worst excesses of Allied military doctrines and the waste of life on the Western Front, were determined that the role of the commander was to look after, and protect as far as possible, the troops under their command.) Bean, who wrote in his diary of Monash "We do not want Australia represented by men mainly because of their ability, natural and inborn in Jews, to push themselves", conspired with Keith Murdoch to undermine Monash, and have him removed from the command of the Australian Corps. They misled Prime Minister Billy Hughes into believing that senior officers were opposed to Monash. Hughes arrived at the front before the Battle of Hamel prepared to replace Monash, but after consulting with senior officers, and after seeing the superb power of planning and execution displayed by Monash, he changed his mind.

In June 1916, Monash and his command were transferred to the Western Front, being sent to the front around Armentières. In July, Monash was promoted to major general and placed in command of the Australian 3rd Division. He trained the division in England with attention to detail, and after the division was sent to the Western Front in November 1916, led stage-by-stage to the nearest approach that could be improvised to the conditions of actual warfare. He was involved in many actions, including Messines, Broodseinde, and the First Battle of Passchendaele, with some successes, but with the usual heavy casualties. The British High Command was impressed by Monash's abilities and enthusiasm. In May 1918, he was promoted to lieutenant general and made commander of the Australian Corps, at the time the largest individual corps on the Western Front.

The Australians then achieved a series of victories against the Germans at Chuignes, Mont St Quentin, Peronne and Hargicourt. Monash had 208,000 men under his command, including 50,000 inexperienced Americans. Monash planned the attack on the German defences in the Battle of the Hindenburg Line between 16 September and 5 October 1918. The Allies eventually breached the Hindenburg Line by 5 October, and the war was essentially over. On 5 October, Prinz Max von Baden, on behalf of the German Government, asked for an immediate armistice.

Soon after the conclusion of hostilities Monash was appointed Director-General of Repatriation and Demobilisation, heading a newly created department to carry out the repatriation of the Australian troops from Britain and Europe. In August 1919, while in London, he wrote a book titled The Australian Victories in France in 1918, although it was not published until April 1920. He returned to Australia on 26 December 1919 to an enthusiastic welcome. Shortly after his return, on 27 February 1920, Monash's wife, Vic, died of cervical cancer. Later, Monash worked in prominent civilian positions, the most notable being head of the State Electricity Commission of Victoria (SECV) from October 1920. He was also vice-chancellor of the University of Melbourne from 1923 until his death eight years later.

Monash was a founding member of the Rotary Club of Melbourne, Australia's first Rotary Club, and served as its second President (1922–23). In 1927, he became President of the newly founded Zionist Federation of Australia and New Zealand.

He was called upon by the Victorian Government of Harry Lawson in 1923 to organise "special constables" to restore order during the 1923 Victorian Police strike. He was one of the principal organisers of the annual observance of ANZAC Day, and oversaw the planning for Melbourne's monumental war memorial, the Shrine of Remembrance. Monash was honoured with numerous awards and decorations from universities and foreign governments. According to his biographer Geoffrey Serle: "[i]n the 1920s Monash was broadly accepted, not just in Victoria, as the greatest living Australian".

Sir John Monash died in Melbourne on 8 October 1931 from a heart attack, and he was given a state funeral. An estimated 300,000 mourners, the nation's largest funeral crowd to that time, came to pay their respects. After a Jewish Service, and a 17-gun salute, he was buried in Brighton General Cemetery. In a final sign of humility, despite his achievements, honours and titles, he instructed that his tombstone simply bear the words "John Monash". He was survived by his daughter, Bertha (1893–1979).

During the August offensive that was launched by the Allies to break the deadlock on the peninsula, Monash's brigade was to conduct a "left hook" to the capture of Hill 971, the highest point on the Sari Bair range. On the evening of 6/7 August, the brigade launched its attack, but poor maps, heavy resistance and the mountainous terrain defeated them. Elsewhere, the offensive also stalled, resulting in disaster for the last co-ordinated effort to defeat the Turkish forces on the Gallipoli Peninsula. By mid-August, Monash's brigade was down to just 1,400 men out of the 3,350 it had begun the campaign with. On 21 August, Monash led them in an attack on Hill 60, before it was withdrawn from the peninsula for rest. While the brigade recuperated on Lemnos, Monash took leave in Egypt, where he learned of his appointment as a Companion of the Order of the Bath. In November, the 4th Brigade returned to Gallipoli, occupying a "quiet sector" around Bauchop's Hill. Monash used his engineering knowledge to improve his brigade's position to withstand the winter, and he worked to improve the conditions that his troops would have to endure, but in mid-December the order to evacuate the peninsula came.

Since 2013, there has been a movement to posthumously promote Monash to the rank of field marshal. Monash would be the fourth person, and only second Australian-born person, to hold this rank. The movement is led by Tim Fischer, former Australian Deputy Prime Minister and author of the book, Maestro John Monash: Australia's Greatest Citizen General, and supported by other Australian Members of Parliament including Josh Frydenberg and Cathy McGowan. According to Tim Fischer, Monash was denied promotion during his life due to discrimination, including as a result of his German-Jewish ancestry and his status as a reservist rather than professional soldier.

In October 2015, the Jerilderie Shire Council unanimously adopted the "Jerilderie Proposition", calling on the Australian Government to promote Monash:

In April 2018, Neil James, Executive Director of the Australian Defence Association, suggested that posthumously promoting Monash was unnecessary and "would demean his record." James also wrote that the campaign to do so highlighted the Problem of "emotive mythology about our military history." He pointed out that Harry Chauvel was the first Australian to command a division and become a corps commander, being promoted to Lieutenant-General a year before Monash. James added "I have yet to meet or even hear of [a military historian] who supports the Monash promotion proposal".