Theiler was born in Pretoria, then the capital of the South African Republic (now South Africa); his father Arnold Theiler was a veterinary bacteriologist. He attended Pretoria Boys High School, Rhodes University College, and University of Cape Town Medical School, graduating in 1918. He left South Africa for London to study at St Thomas's Hospital Medical School, King's College London, and at the London School of Hygiene and Tropical Medicine. In 1922, he was awarded a diploma in tropical Medicine and hygiene; he became a licentiate of the Royal College of Physicians of London and a member of the Royal College of Surgeons of England.

Theiler wanted to pursue a career in research, so in 1922, he took a position at the Harvard University School of Tropical Medicine in Cambridge, Massachusetts. He spent several years investigating amoebic dysentery and trying to develop a vaccine for rat-bite fever.

After becoming assistant to Andrew Sellards, he started working on yellow fever. In 1926, they disproved Hideyo Noguchi's hypothesis that yellow fever was caused by the bacterium Leptospira icteroides. In 1928, the year after the disease was identified conclusively as a virus, they showed that the African and South American viruses are immunologically identical. (This followed Adrian Stokes' inducing yellow fever in rhesus macaques from India). In the course of this research, Theiler contracted yellow fever, but survived and developed immunity.

He married Lillian Graham in 1928, and they had one daughter. He died in New Haven, Connecticut.

In 1930, Theiler moved to the Rockefeller Institute in New York, where he later became Director of the Virus Laboratory. He was professor of epidemiology and public health at Yale University from 1964 to 1967.

In 1937, Max Theiler discovered a filterable agent that was a known cause for paralysis in mice. He found the virus was not transmittable to rhesus macaques, and that only some mice developed symptoms. The virus is now referred to as Theiler's murine encephalomyelitis virus. The virus has been well characterized, and now serves as a standard model for studying multiple sclerosis.

For this work, Theiler received the 1951 Nobel Prize in Physiology or Medicine. Theiler also was awarded the Royal Society of Tropical Medicine and Hygiene's Chalmers Medal in 1939, Harvard University's Flattery Medal in 1945, and the American Public Health Association's Lasker Award in 1949.