Lewis was the first-born child of Matthew and Frances Maria Sewell Lewis. His father, Matthew Lewis, was the son of william Lewis and Jane Gregory and was born in England in 1750. He attended Westminster School before proceeding to Christ Church, Oxford, where he received his bachelor's degree in 1769 and his master's in 1772. During his time at Westminster, Lewis's parents separated, and he idolized his mother without disregarding his father. Mrs Lewis moved to France in this period; while there, she was in continuous correspondence with Matthew. The correspondence between Matthew and his mother consisted of discussion regarding the poor state of his mother's welfare and estate.

That same year, Lewis was appointed Chief Clerk in the War Office. The following year, he married Frances Maria Sewell, a young woman who was very popular at court. She was the third daughter of Sir Thomas Sewell and was one of eight children born in his first marriage. Her family, like Lewis's, had connections with Jamaica. As a child, she spent her time in Ottershaw. In December 1775, in addition to his War Office post, Lewis became the Deputy Secretary at War. With one exception, he was the first to hold both positions and receive both salaries contemporaneously. Lewis owned considerable property in Jamaica, within four miles of Savanna-la-Mer, or Savanna-la-Mar, which was hit by a devastating earthquake and hurricane in 1779. His son would later inherit this property.

In addition to Matthew Gregory Lewis, Matthew and Frances had three other children: Maria, Barrington, and Sophia Elizabeth. On 23 July 1781, when Matthew was six and his youngest sister one-and-a-half years old, Frances left her husband, taking the music master, Samuel Harrison, as her lover. During their estrangement, Frances lived under a different name, Langley, in order to hide her location from her husband, although he still learned of whereabouts. On 3 July 1782, Frances gave birth to a child. That same day, hearing of the birth, her estranged husband returned. Afterwards, he began to arrange a legal separation from his wife. After formally accusing his wife of adultery through the Consistory Court of the Bishop of London on 27 February 1783, he petitioned the House of Lords for permission to bring about a bill of divorce. However, as these bills were rarely granted, it was rejected when brought to a vote. Consequently, Matthew and Frances remained married until his death in 1818. Frances, though withdrawing from society and temporarily moving to France, was always supported financially by her husband and then later, her son. She later returned to London and then finished her life at Leatherhead, rejoining society and even becoming a lady-in-waiting to the Princess of Wales. Frances and her son remained quite close, with her taking on the responsibility of helping him with his literary career. She even became a published author, much to her son's dislike.

Again like his father, he entered Christ Church, Oxford on 27 April 1790 at the age of 15. He graduated with a bachelor's degree in 1794 and earned a master's degree from the same college in 1797.

In 1791, he sent his mother a copy of a farce that he had written named The Epistolary Intrigue. Though he intended the play to be performed at London’s Drury Lane, it was rejected there and then later by the neighbouring Covent Garden. He supposedly completed a two-volume novel in the same period. This survives only in fragments in the posthumously published The Life and Correspondence of M. G. Lewis. In March 1792, Lewis translated the French opera Felix and sent it to Drury Lane, hoping to earn money for his mother. While he tried to write a novel like Horace Walpole’s The Castle of Otranto, he mainly adhered to theatre, writing The East Indian. However, it would be seven years before this appeared on stage at Drury Lane. In Germany, he even translated Wieland's Oberon, a difficult work of poetry which earned him the respect of his acquaintance, Johann Wolfgang von Goethe.

While Lewis pursued these literary ambitions, mainly to earn money for his mother, his father's influences secured him the position as an attaché to the British embassy in The Hague. He arrived on 15 May 1794 and remained until December of the same year. Though finding friends at the local pubs (his favourite being Madame de Matignon's Salon), amongst visiting French aristocracy who were fleeing revolutionary France, Lewis saw The Hague as a place of boredom and disliked its Dutch citizens. It was here that he produced, in ten weeks, his romance Ambrosio, or The Monk which was published anonymously in the summer of the following year. It immediately achieved Celebrity for Lewis. However, some passages were of such a nature that about a year after its appearance, an injunction to restrain its sale was obtained. In the second edition, Lewis, in addition to citing himself as the author and as a Member of Parliament (for Hindon, Wiltshire), removed what he assumed were the objectionable passages, yet, the work retained much of its horrific character. Lord Byron in English Bards and Scotch Reviewers wrote of "Wonder-working Lewis, Monk or Bard, who fain wouldst make Parnassus a churchyard; Even Satan's self with thee might dread to dwell, And in thy skull discern a deeper hell." The Marquis de Sade also praised Lewis in his essay "Reflections on the Novel".

On 22 March 1802 Harriett Litchfield appeared in a Gothic monodrama at The Haymarket called The Captive by Lewis. This recounts the story of a wife imprisoned by her husband. The stage directions included details designed to improve the gothic situation. Litchfield was complimented for her delivery "in the most perfect manner", but she plays a woman denied any human contact and kept in a modern dungeon. She is not mad but realises that she will soon be a maniac. The play is thought to have been suggested by one of Mary Wollstonecraft's books. It was said that even the staff of the theatre left in horror. The play was only staged once.

Lewis visited Percy Bysshe Shelley and Mary Shelley at Geneva, Switzerland in the summer of 1816 and recounted five ghost stories which Shelley recorded in his "Journal at Geneva (including ghost stories) and on return to England, 1816", beginning with the entry for 18 August, which was published posthumously.

Lewis held two estates in Jamaica, Cornwall estate in Westmoreland Parish and Hordley estate in Saint Thomas Parish. According to the slave registers, Hordley was co-owned with George Scott and Matthew Henry Scott and their shares were purchased by Lewis in 1817, thus making him sole owner of more than 500 slaves.

Lewis died on board ship whilst sailing back from visiting his estates in Jamaica in 1818, and was buried at sea.

The Life and Correspondence of M. G. Lewis, in two volumes, was published in 1839. The Effusions of Sensibility, his first novel, was never completed.