Lionel Barrymore was born Lionel Herbert Blythe in Philadelphia, the son of actors Georgiana Drew Barrymore and Maurice Barrymore (born Herbert Arthur Chamberlayne Blythe). He was the elder brother of Ethel and John Barrymore, the uncle of John Drew Barrymore and Diana Barrymore and the great-uncle of Drew Barrymore, among other members of the Barrymore family. He attended private schools as a child, including the Art Students League of New York. While raised a Roman Catholic, Barrymore attended the Episcopal Academy in Philadelphia. Barrymore graduated from Seton Hall Preparatory School, the Roman Catholic college prep school, in the class of 1891.

Reluctant to follow his parents' career, Barrymore appeared together with his formidable grandmother Louisa Lane Drew on tour and in a stage production of The Rivals at the age of 15. He later recounted that "I didn't want to act. I wanted to paint or draw. The theater was not in my blood, I was related to the theater by marriage only; it was merely a kind of in-law of mine I had to live with." Nevertheless, he soon found success on stage in character roles and continued to act, although he still wanted to become a Painter and also to compose music. He appeared on Broadway in his early twenties with his uncle John Drew Jr. in such plays as The Second in Command (1901) and The Mummy and the Hummingbird (1902), the latter of which won him critical acclaim. Both were produced by Charles Frohman, who produced other plays for Barrymore and his siblings, John and Ethel. The Other Girl in 1903–04 was a long-running success for Barrymore. In 1905, he appeared with John and Ethel in a pantomime, starring as the title character in Pantaloon and playing another character in the other half of the bill, Alice Sit-by-the-Fire.

In 1906, after a series of disappointing appearances in plays, Barrymore and his first wife, the Actress Doris Rankin, left their stage careers and travelled to Paris, where he trained as an Artist. He did not achieve success as a Painter, and in 1909 he returned to the US. In December of that year, he returned to the stage in The Fires of Fate, in Chicago, but left the production later that month after suffering an attack of nerves about the forthcoming New York opening. The producers gave appendicitis as the reason for his sudden departure. Nevertheless, he was soon back on Broadway in The Jail Bird in 1910 and continued his stage career with several more plays. He also joined his family troupe, from 1910, in their vaudeville act, where he was happy not to worry as much about memorizing lines.

He was married twice, to actresses Doris Rankin and Irene Fenwick, a one-time lover of his brother, John. Doris's sister Gladys was married to Lionel's uncle Sidney Drew, which made Gladys both his aunt and sister-in-law. Doris Rankin bore Lionel two daughters, Ethel Barrymore II (1908 – 1910) and Mary Barrymore (1916 – 1917). Neither child survived infancy. Barrymore never truly recovered from the deaths of his girls, and their loss undoubtedly strained his marriage to Doris Rankin, which ended in 1923. Years later, Barrymore developed a fatherly affection for Jean Harlow, who was born about the same time as his daughters. When Harlow died in 1937, Barrymore and Clark Gable mourned her as though she had been family.

Barrymore began making films about 1911 with D.W. Griffith at the Biograph Studios. Lionel and Doris were in Paris in 1908, where Lionel attended art school and where their first baby, Ethel, was born. Lionel confirms in his autobiography, We Barrymores, that he and Doris were in France when Bleriot flew the English Channel on July 25, 1909. Barrymore made The Battle (1911), The New York Hat (1912), Friends and Three Friends (1913). In 1915 he co-starred with Lillian Russell in a movie called Wildfire, one of the legendary Russell's few film appearances. He also was involved in writing and directing at Biograph. The last silent film he directed, Life's Whirlpool (Metro Pictures 1917), starred his sister, Ethel. He acted in more than 60 silent films with Griffth.

From 1912 to 1917, Barrymore was away from the stage again while he established his film career, but after the First World War, he had several successes on Broadway, where he established his reputation as a dramatic and character actor, often performing together with his wife. He proved his talent in such plays as Peter Ibbetson (1917) (with brother John), The Copperhead (1918) (with Doris), The Jest (1919) (again with John) and The Letter of the Law (1920). Lionel gave a short-lived performance as MacBeth in 1921 opposite veteran Actress Julia Arthur as Lady MacBeth, but the production encountered strongly negative criticism. His last stage success was in Laugh, Clown, Laugh, in 1923, with his second wife, Irene Fenwick; they met while acting together in The Claw the previous year, and after they fell in love he divorced his first wife. He also received negative notices in three productions in a row in 1925. After these, he never again appeared on stage.

In 1920, Barrymore reprised his stage role in the film adaptation of The Copperhead. Before the formation of Metro-Goldwyn-Mayer in 1924, Barrymore forged a good relationship with Louis B. Mayer early on at Metro Pictures. He made several silent features for Metro, most of them now lost. In 1923, Barrymore and Fenwick went to Italy to film The Eternal City for Metro Pictures in Rome, combining work with their honeymoon. He occasionally freelanced, returning to Griffith in 1924 to film America. In 1924, he also went to Germany to star in British producer-director Herbert Wilcox's Anglo-German co-production Decameron Nights, filmed at UFA's Babelsberg studios outside of Berlin. In 1925, he left New York for Hollywood. He starred as Frederick Harmon in Director Henri Diamant-Berger's drama Fifty-Fifty (1925) opposite Hope Hampton and Louise Glaum, and made several more freelance motion pictures, including The Bells (Chadwick Pictures 1926) with a then-unknown Boris Karloff. His last film for Griffith was in 1928's Drums of Love.

Lew Ayres biographer Lesley Coffin and Louis B. Mayer biographer Scott Eyman argue that it was the combination of the broken hip and Barrymore's worsening arthritis that put him in a wheelchair. Barrymore family biographer Margot Peters says Gene Fowler and James Doane said Barrymore's arthritis was caused by syphilis, which they say he contracted in 1925. Eyman, however, explicitly rejects this hypothesis.

Prior to his marriage to Irene, Barrymore and his brother John engaged in a dispute over the issue of Irene's chastity in the wake of her having been one of John's lovers. The brothers didn't speak again for two years and weren't seen together until the premiere of John's film Don Juan in 1926, by which time they had patched up their differences. After 1926, Barrymore worked almost exclusively for Metro-Goldwyn-Mayer. His first talking picture was The Lion and the Mouse; his stage experience allowed him to excel in delivering the dialogue in sound films.

Several sources argue that arthritis alone confined Barrymore to a wheelchair. Film Historian Jeanine Basinger says that his arthritis was serious by at least 1928, when Barrymore made Sadie Thompson. Film Historian David Wallace says it was well known that Barrymore was addicted to morphine due to arthritis by 1929. A history of Oscar-winning actors, however, says Barrymore was only suffering from arthritis, not crippled by it. Marie Dressler biographer Matthew Kennedy notes that when Barrymore won his Best Actor Oscar award in 1930, the arthritis was still so minor that it only made him limp a little as he went on stage to accept the honor. Barrymore can be seen being quite physical in late silent films like The Thirteenth Hour and West of Zanzibar, where he can be seen climbing out of a window.

In a series of Doctor Kildare movies in the 1930s and 1940s, he played the irascible Doctor Gillespie, a role he repeated in an MGM radio series that debuted in New York in 1950 and was later syndicated. He also played the title role in the 1940s radio series, Mayor of the Town. Barrymore had broken his hip in an accident, hence he played Gillespie in a wheelchair. Later, his worsening arthritis kept him in the chair. The injury also precluded his playing Ebenezer Scrooge in the 1938 MGM film version of A Christmas Carol, a role Barrymore played every year but two (replaced by brother John Barrymore in 1936 and replaced by Orson Welles in 1938) on the radio from 1934 through 1953. He also had a role with Clark Gable in Lone Star in 1952. His final film appearance was a cameo in Main Street to Broadway, an MGM musical comedy released in 1953. His sister Ethel also appeared in the film.

Paul Donnelly says Barrymore's inability to walk was caused by a drawing table falling on him in 1936, breaking Barrymore's hip. Barrymore tripped over a cable while filming Saratoga in 1937 and broke his hip again. (Film Historian Robert Osborne says Barrymore also suffered a broken kneecap.) The injury was painful enough that Donnelly, quoting Barrymore, says that Louis B. Mayer bought Barrymore $400 worth of cocaine every day to help him cope with the pain and allow him to sleep. Author David Schwartz says the hip fracture never healed, which was why Barrymore could not walk, while MGM Historian John Douglas Eames claims that the injury was "crippling". Barrymore himself said in 1951, that it was breaking his hip twice that kept him in the wheelchair. He said he had no other problems, and that the hip healed well, but it made walking exceptionally difficult. Film Historian Allen Eyles reached the same conclusion.

Whatever the cause, Barrymore's performance in Captains Courageous in 1937 was one of the last times he would be seen standing and walking unassisted. Afterward, Barrymore was able to get about for a short period of time on crutches even though he was in great pain. During the filming of 1938's You Can't Take It With You, the pain of standing with crutches was so severe that Barrymore required hourly shots of painkillers. By 1938, Barrymore used a wheelchair exclusively and never walked again. He could, however, stand for short periods of time such as at his brother's funeral in 1942.

Barrymore also composed music. His works ranged from solo piano pieces to large-scale orchestral works, such as "Tableau Russe," which was performed twice in Dr. Kildare's Wedding Day (1941), first by Nils Asther on piano and later by a full symphony orchestra. His piano compositions, "Scherzo Grotesque" and "Song Without Words", were published by G. Schirmer in 1945. Upon the death of his brother John in 1942, he composed a memoriam, which was performed by the Philadelphia Orchestra. He also composed the theme song of the radio program Mayor of the Town.

Barrymore was a Republican. In 1944, he attended the massive rally organized by David O. Selznick in the Los Angeles Coliseum in support of the Dewey-Bricker ticket as well as Governor Earl Warren of California, who would become Dewey's running mate in 1948 and later the Chief Justice of the United States. The gathering drew 93,000, with Cecil B. DeMille as the master of ceremonies and with short speeches by Hedda Hopper and Walt Disney. Among the others in attendance were Ann Sothern, Ginger Rogers, Randolph Scott, Adolphe Menjou, Gary Cooper, Edward Arnold, william Bendix, and Walter Pidgeon.

He is well known for his role as Mr. Potter, the miserly and mean-spirited banker in It's a Wonderful Life (1946) opposite James Stewart. The role suggested that of the "unreformed" stage of Barrymore's "Scrooge" characterization.

He wrote a historical novel, Mr. Cantonwine: A Moral Tale (1953).

Barrymore died on November 15, 1954 from a heart attack in Van Nuys, California. He was entombed in the Calvary Cemetery in East Los Angeles, California.

Barrymore received two stars on the Hollywood Walk of Fame in 1960—a motion pictures star and a radio star. The stars are located at 1724 Vine Street for motion pictures, and 1651 Vine Street for radio. He was also inducted into the American Theater Hall of Fame, along with his siblings, Ethel and John.