Born in Burslem, Staffordshire, the eleventh and last child of Thomas Wedgwood (d. 1739) and Mary Wedgwood (née Stringer; d. 1766), Josiah was raised within a family of English Dissenters, he was the grandson of a Unitarian minister and was an active Unitarian. By the age of nine, he was proving himself to be a skilled potter. He survived a childhood bout of smallpox to serve as an apprentice potter under his eldest brother Thomas Wedgwood IV. Smallpox left Josiah with a permanently weakened knee, which made him unable to work the foot pedal of a potter's wheel. As a result, he concentrated from an early age on designing pottery and then making it with the input of other potters.

In his early twenties, Wedgwood began working with the most renowned English pottery-maker of his day, Thomas Whieldon, who eventually became his Business partner in 1754. He began experimenting with a wide variety of techniques, an experimentation that coincided with the burgeoning of the nearby industrial city of Manchester. Inspired, Wedgwood leased the Ivy Works in the town of Burslem. From 1768 to 1780 he partnered with Thomas Bentley, a potter of sophistication and astute taste. Over the course of the next decade, his experimentation (and a considerable injection of capital from his marriage to a richly endowed distant cousin) transformed the sleepy artisan works into the first true pottery factory.

By 1763, he was receiving orders from the highest levels of the British nobility, including Queen Charlotte. Wedgwood convinced her to let him name the line of pottery she had purchased "Queen's Ware", and trumpeted the royal association in his paperwork and stationery. Anything Wedgwood made for the Queen was automatically exhibited before it was delivered. In 1764 he received his first order from abroad. Wedgwood marketed his Queen's Ware at affordable prices, everywhere in the world British trading ships sailed. In 1767 he wrote, "The demand for this sd. Creamcolour, Alias, Queen Ware, Alias, Ivory, still increases -- It is amazing how rapidly the use of it has spread all most [sic] over the whole Globe."

In January 1764 Wedgwood married Sarah Wedgwood (1734–1815), his third cousin. They had eight children:

He first opened a warehouse at Charles Street, Mayfair in London as early as 1765 and it soon became an integral part of his sales organization. In two years his trade had outgrown his rooms in Grosvenor Square. In 1767 Wedgwood and Bentley drew up an agreement to divide decorative wares between them, the domestic wares being sold on Wedgwood's behalf. A special display room was built to beguile the fashionable company. Wedgwood's in fact had become one of the most fashionable meeting places in London. His man had to work day and night to satisfy the demand and the crowds of visitors showed no sign of abating. The proliferating decoration, the exuberant colours, and the universal gilding of rococo were banished, the splendours of baroque became distasteful; the intricacies of chinoiserie lost their favour. The demand was for purity, simplicity and antiquity. To encourage this outward spread of fashion and to speed it on its way Wedgwood set up warehouses and showrooms at Bath, Liverpool and Dublin in addition tot his showrooms at Etruria and in Westminster. Great care was taken in timing the openings, and new goods were held back to increase their effect.

The most important of Wedgwood's early achievements in vase production was the perfection of the black stoneware body, which he called 'basalt'. This body could imitate the colour and shapes of Etruscan or Greek vases which were being excavated in Italy. In 1769 'vases was all the cry' in London; he opened a new factory called Etruria, north of Stoke. Wedgwood became what he wished to be: 'Vase Maker General to the Universe'. Around 1771 he started to experiment with Jasperware, but he did not advertise this new product for a couple of years.

Sir George Strickland, 6th Baronet was asked for advice on getting Models from Rome. Gilding was to prove unpopular, and around 1772 Wedgwood reduced the amount of 'offensive gilding' in response to suggestions from Sir william Hamilton. When English society found the uncompromisingly naked figure of the classics 'too warm' for their taste, and the ardor of the Greek gods too easily apparent, Wedgwood was quick to cloak their pagan immodesty - gowns for the girls and fig leaves for the gods were usually sufficient. Just as he felt that his flowerpots would sell more if they were called 'duches of Devonshire flowerpots', his creamware more if called Queensware, so he longed for Brown, James Wyatt, and the brothers Adam to lead the Architect in the use of his chimney pieces and for George Stubbs to lead the way in the use of Wedgwood plaques.

In 1773, Catherine the Great of Imperial Russia ordered the Green Frog Service from Wedgwood, consisting of 952 pieces and over a thousand original paintings, for one of its palaces — the Kekerekeksinen Palace (palace on a frog swamp (in Finnish)), later known as Chesme Palace. Most of the painting was carried out in Wedgwood's decorating studio at Chelsea. Its display, Wedgwood thought, 'would bring an immence (sic) number of People of Fashion into our Rooms. For over a month the fashionable world thronged the rooms and blocked the streets with their carriages. (Catharine paid ₤ 2,700. It can still be seen in the Hermitage Museum.) Strictly uneconomical in themselves, the advertising value of these productions were huge.

Not long after the new works opened, continuing trouble with his smallpox-afflicted knee made necessary the amputation of his right leg. In 1780, his long-time Business partner Thomas Bentley died, and Wedgwood turned to Darwin for help in running the Business. As a result of the close association that grew up between the Wedgwood and Darwin families, Josiah's eldest daughter would later marry Erasmus' son.

He was elected to the Royal Society in 1783 for the development of a pyrometer, a device to measure the extremely high temperatures that are found in kilns during the firing of pottery.

In 1784 Wedgwood was exporting nearly 80% of his total produce. By 1790 he had sold to every city in Europe. To give his customers a greater sense of the rarity of his goods, he strictly limited the number of jaspers on display in his rooms at any given time.

From 1787 until his death in 1795, Wedgwood actively participated in the abolition of slavery cause. His Slave Medallion brought public attention to abolition. Wedgwood reproduced the design in a cameo with the black figure against a white background and donated hundreds to the society for distribution. Thomas Clarkson wrote; "ladies wore them in bracelets, and others had them fitted up in an ornamental manner as pins for their hair. At length the taste for wearing them became general, and thus fashion, which usually confines itself to worthless things, was seen for once in the honorable office of promoting the cause of justice, humanity and freedom".

To clinch his position as leader of the new fashion he sought out the famous Barberini vase as the final test of his technical skill. Wedgwood's obsession was to duplicate the Portland Vase, a blue and white glass vase dating to the first century BC. For three years he worked on the project, eventually producing what he considered a satisfactory copy in 1789.

After passing on his company to his sons, Wedgwood died at home, probably of cancer of the jaw, in 1795. He was buried three days later in the parish church of Stoke-on-Trent. Seven years later a marble memorial tablet commissioned by his sons was installed there.

Wedgwood was a prominent slavery abolitionist. His friendship with Thomas Clarkson – abolitionist campaigner and the first Historian of the British abolition movement – aroused his interest in slavery. Wedgwood mass-produced cameos depicting the seal for the Society for Effecting the Abolition of the Slave Trade and had them widely distributed, which thereby became a popular and celebrated image. The Wedgwood medallion was the most famous image of a black person in all of 18th-century art. The actual design of the cameo was probably done by either william Hackwood or Henry Webber who were modellers in his Stoke-on-Trent factory.

One of the wealthiest entrepreneurs of the 18th century, Wedgwood created goods to meet the demands of the consumer revolution and growth in wealth of the middle classes that helped drive the Industrial Revolution in Britain. He is credited as the Inventor of modern marketing, specifically direct mail, money back guarantees, travelling salesmen, carrying pattern boxes for display, self-service, free delivery, buy one get one free, and illustrated catalogues. Wedgwood is also noted as an early adopter/founder of managerial accounting principles in Anthony Hopwood's "Archaeology of Accounting Systems."