Khushwant Singh was born in Hadali, Khushab District, Punjab (which now lies in Pakistan), in a Sikh family. He was the younger son of Sir Sobha Singh and Veeran Bai. Births and deaths were not recorded in his time, and for him his father simply made up 2 February 1915 for his school enrolment at Modern School, New Delhi. But his grandmother Lakshmi Bai asserted that he was born in August, so he later set the date for himself as 15 August. Sobha Singh was a prominent builder in Lutyens' Delhi. His uncle Sardar Ujjal Singh (1895–1983) was previously Governor of Punjab and Tamil Nadu.

He entered Delhi Modern School in 1920 and studied there till 1930. There he met his Future wife, Kawal Malik, one year his junior. He continued higher education at Government College, Lahore, St. Stephen's College in Delhi and King's College London, before reading for the Bar at the Inner Temple.

In 1943 he had already written his own obituary, included in his collection of short stories Posthumous. Under the headline "Sardar Khushwant Singh Dead", the text reads:

Born in Punjab, Khushwant Singh was educated in New Delhi, and studied law at St. Stephen's College, Delhi, and King's College London. After working as a Lawyer in Lahore Court for eight years, he joined the Indian Foreign Service upon the Independence of India from British Empire in 1947. He was appointed Journalist in the All India Radio in 1951, and then moved to the Department of Mass Communications of UNESCO at Paris in 1956. These last two careers encouraged him to pursue a literary career. As a Writer, he was best known for his trenchant secularism, humour, sarcasm and an abiding love of poetry. His comparisons of social and behaviour characteristics of Westerners and Indians are laced with acid wit. He served as the Editor of several literary and news magazines, as well as two newspapers, through the 1970s and 1980s. Between 1980-1986 he served as Member of Parliament in Rajya Sabha, the upper house of the Parliament of India.

Singh was a votary of greater diplomatic relations with Israel at a time when India did not want to displease Arab nations where thousands of Indians found employment. He visited Israel in the 1970s and was impressed by its progress.

Khushwant Singh was bestowed with the Padma Bhushan in 1974. But he returned the award in 1984 in protest against Operation Blue Star in which the Indian Army raided Amritsar. In 2007 he was awarded the Padma Vibhushan, the second-highest civilian award in India.

Khushwant Singh started his professional career as a practising Lawyer in 1939. He worked at Lahore Court for eight years. In 1947 he entered Indian Foreign Service for the newly independent India. He started as Information Officer of the Government of India in Toronto, Canada. He was Press Attaché and Public Officer for the Indian High Commission for four years in London and Ottawa. In 1951 he joined the All India Radio as a Journalist. Between 1954 and 1956 he worked in Department of Mass Communication of the UNESCO at Paris. From 1956 he turned to editorial services. He founded and edited Yojana, an Indian government journal in 1951 -1953; The Illustrated Weekly of India, a newsweekly; and two major Indian newspapers, The National Herald and the Hindustan Times. During his tenure, The Illustrated Weekly became India's pre-eminent newsweekly, with its circulation raising from 65,000 to 400000. After working for nine years in the weekly, on 25 July 1978, a week before he was to retire, the management asked Singh to leave "with immediate effect". A new Editor was installed the same day. After Singh's departure, the weekly suffered a huge drop in readership. In 2016 Khushwant Singh enters Limca Book of Records as a tribute.

From 1980 to 1986, Singh was a member of Rajya Sabha, the upper house of the Indian parliament. He was awarded the Padma Bhushan in 1974 for Service to his country. In 1984, he returned the award in protest against the siege of the Golden Temple by the Indian Army. In 2007, the Indian government awarded Khushwant Singh the Padma Vibhushan.

Singh was married to Kawal Malik. Malik was his childhood friend who had moved to London earlier. They met again when he studied law at King's College London, and soon got married. They had a son, named Rahul Singh, and a daughter, named Mala. His wife predeceased him in 2001. Actress Amrita Singh is the daughter of his brother Daljit Singh's son - Shavinder Singh and Rukhsana Sultana. He stayed in "Sujan Singh Park", near Khan Market New Delhi, Delhi's first apartment complex, built by his father in 1945, and named after his grandfather. His grandniece Tisca Chopra is a noted TV and Film Actress.

Singh was a self-proclaimed agnostic, as the title of his 2011 book Agnostic Khushwant: There is no God explicitly revealed. He was particularly against organised religion. He was evidently inclined towards atheism, as he said, "One can be a saintly person without believed in God and a detestable villain believing in him. In my personalised religion, There Is No God!" He also once said, "I don't believe in rebirth or in reincarnation, in the day of judgement or in heaven or hell. I accept the finality of death." His last book The Good, The Bad and The Ridiculous was published in October 2013, following which he retired from writing. The book was his continued critique of religion and especially its practice in India, including the critique of the clergy and Priests. It earned a lot of acclaim in India, where such debates are rare.

Television Documentary: Third World—Free Press (also presenter; Third Eye series), 1983 (UK).