Schnabel resides at 360 West 11th Street, in a former West Village horse stable that he purchased and converted for residential use, adding five luxury condominiums in the style of a Northern Italian palazzo. It is named the Palazzo Chupi, and it is easy to spot because it is painted pink.

Born in Brooklyn, New York, to Esta (née Greenberg) and Jack Schnabel, he moved with his family to Brownsville, Texas in 1965.

He received his B.F.A. at the University of Houston. After graduating, he sent an application to the Independent Study Program (ISP) at the Whitney Museum of American Art in New York. His application included slides of his work sandwiched between two pieces of bread. He was admitted into the program and studied there from 1973-1975.

It was with his first solo show, at the Mary Boone Gallery in 1979, that Schnabel had his breakthrough; all his works were sold in advance. He participated at the Venice Biennale in 1980 with Anselm Kiefer and George Baselitz. By the time he exhibited his work in a show jointly organized by Boone and Leo Castelli in 1981, he had become firmly established and was the youngest Artist in the legendary exhibition 'A New Spirit in Painting' in the Royal Academy of Arts. His now famous "plate paintings" — large-scale paintings set on broken ceramic plates—received a boisterous and critical reception from the art world. His wild and expressive works were classed as neo-expressionism by art critics. In the years to follow Schnabel's success on the art market would above all be criticised.

Schnabel published his autobiography, CVJ: Nicknames of Maitre D's & Other Excerpts From Life (Random House, New York), in 1987 and released the album Every Silver Li Ning Has a Cloud on Island Records (Catalog #314-524 111-2) in 1995.

Schnabel began his film career in the 1990s with the film Basquiat, a biopic on the Painter Jean-Michel Basquiat (1996), followed by Before Night Falls (2000), an adaptation of Reinaldo Arenas' autobiographical novel, which he also produced, which won the Grand Jury Prize at the Venice Film Festival. He directed The Diving Bell and the Butterfly (2007), an adaptation (with a screenplay by Ronald Harwood) of a French memoir by Jean-Dominique Bauby. The Diving Bell and the Butterfly earned him the award for best Director at the 2007 Cannes Film Festival, the Golden Globe for best Director, the Independent Spirit Award for best Director, and a nomination for the Academy Award for Best Director.

Recorded in Brooklyn, New York, in 1993, the album features guest Musicians including Bill Laswell, Bernie Worrell, Buckethead, and Nicky Skopelitis.

In 2002, Schnabel painted the cover artwork for the Red Hot Chili Peppers' eighth studio album, By The Way. The woman featured on the cover of By the Way is Julian's daughter, Stella Schnabel, who was band member John Frusciante's then-girlfriend. Regarding the artwork, Frusciante noted: "My girlfriend's father offered to do the album art, so we sent him rough mixes of eight songs, and he just got the vibe of the album from that. He said that he wouldn't be offended if we didn't like it, but we loved what he did. He's also given us great covers for all the singles. He's a true Artist."

His collaboration with Rula Jebreal, who penned the screenplay and original source novel for Schnabel's film Miral, extended beyond the movie. Schnabel was in a relationship with her from 2007 to 2011.

Schnabel had an exhibition at the Art Gallery of Ontario in Toronto, which ran from September 1, 2010 to January 2, 2011 and occupied the entirety of the gallery's fifth floor. It examined "the rich interplay between Schnabel's paintings and films".

In 2011 Museo Correr exhibited Julian Schnabel: Permanently Becoming and the Architecture of Seeing, a selected survey show of Schnabel's career curated by Norman Rosenthal.

Art critic Robert Hughes was one of the most outspoken critics of his work; he once stated that "Schnabel's work is to painting what Stallone's is to acting: a lurching display of oily pectorals." (Time Magazine, August 7, 2012).

Schnabel dated May Andersen; they have a son, who was born in June 2013.

In May 2017, Schnabel announced that he will direct a film about Painter, Vincent Van Gogh during his time in Arles and Auvers-sur-Oise, France. The film is called At Eternity’s Gate and the script was written by Schnabel and French Screenwriter Jean-Claude Carrière and will star Willem Dafoe as Van Gogh.. Other actors include Mathieu Amalric, Mads Mikkelsen, Niels Arestrup, Oscar Isaac as Paul Gauguin and Emmanuelle Seigner as "the woman from Arles" or L'Arlésienne. Shooting started in the fall of 2017.