Goldsmith's birth date and year are not known with certainty. According to the Library of Congress authority file, he told a biographer that he was born on 10 November 1728. The location of his birthplace is also uncertain. He was born either in the townland of Pallas, near Ballymahon, County Longford, Ireland, where his father was the Anglican curate of the parish of Forgney, or at the residence of his maternal grandparents, at the Smith Hill House near Elphin in County Roscommon, where his grandfather Oliver Jones was a clergyman and master of the Elphin diocesan school, and where Oliver studied. When Goldsmith was two years old, his father was appointed the rector of the parish of "Kilkenny West" in County Westmeath. The family moved to the parsonage at Lissoy, between Athlone and Ballymahon, and continued to live there until his father's death in 1747.

In 1744 Goldsmith went up to Trinity College, Dublin. His tutor was Theaker Wilder. Neglecting his studies in theology and law, he fell to the bottom of his class. In 1747, along with four other undergraduates, he was expelled for a riot in which they attempted to storm the Marshalsea Prison. He was graduated in 1749 as a Bachelor of Arts, but without the discipline or distinction that might have gained him entry to a profession in the church or the law; his education seemed to have given him mainly a taste for fine clothes, playing cards, singing Irish airs and playing the flute. He lived for a short time with his mother, tried various professions without success, studied Medicine desultorily at the University of Edinburgh from 1752 to 1755, and set out on a walking tour of Flanders, France, Switzerland and Northern Italy, living by his wits (busking with his flute).

He settled in London in 1756, where he briefly held various jobs, including an apothecary's assistant and an usher of a school. Perennially in debt and addicted to gambling, Goldsmith produced a massive output as a hack Writer on Grub Street for the publishers of London, but his few painstaking works earned him the company of Samuel Johnson, with whom he was a founding member of "The Club". There, through fellow Club member Edmund Burke, he made the acquaintance of Sir George Savile, who would later arrange a job for him at Thornhill Grammar School. The combination of his literary work and his dissolute lifestyle led Horace Walpole to give him the epithet "inspired idiot". During this period he used the pseudonym "James Willington" (the name of a fellow student at Trinity) to publish his 1758 translation of the autobiography of the Huguenot Jean Marteilhe.

In the 1760s Goldsmith witnessed the demolition of an ancient village and destruction of its farms to clear land to become a wealthy man's garden. His poem The Deserted Village, published in 1770, expresses a fear that the destruction of villages and the conversion of land from productive agriculture to ornamental landscape gardens would ruin the peasantry.

Goldsmith wrote this romantic ballad of precisely 160 lines in 1765. The hero and heroine are Edwin, a youth without wealth or power, and Angelina, the daughter of a lord "beside the Tyne." Angelina spurns many wooers, but refuses to make plain her love for young Edwin. "Quite dejected with my scorn," Edwin disappears and becomes a hermit. One day, Angelina turns up at his cell in boy's clothes and, not recognising him, tells him her story. Edwin then reveals his true identity, and the lovers never part again. The poem is notable for its interesting portrayal of a hermit, who is fond of the natural world and his wilderness solitude but maintains a gentle, sympathetic demeanor toward other people. In keeping with eremitical tradition, however, Edwin the Hermit claims to "spurn the [opposite] sex." This poem appears under the title of "A Ballad" sung by the character of Mr. Burchell in Chapter 8 of Goldsmith's novel, The Vicar of Wakefield.

His premature death in 1774 may have been partly due to his own misdiagnosis of his kidney infection. Goldsmith was buried in Temple Church in London. The inscription reads; "HERE LIES/OLIVER GOLDSMITH". There is a monument to him in the centre of Ballymahon, also in Westminster Abbey with an epitaph written by Samuel Johnson.

In the 1925 novel The Painted Veil by W. Somerset Maugham, the last words of the poem An Elegy on the Death of a Mad Dog, "The dog it was that died", are the dying words of bacteriologist Walter Fane, one of the primary characters in the novel.

Two characters in the 1951 comedy The Lavender Hill Mob quote the same line from Goldsmith's poem "The Traveller" – a subtle joke, because the film's plot involves the recasting of stolen gold.

In his ‘Life’, Washington Irving states that Goldsmith was between 5’4” and 5’6” in height, not heavily built but quite muscular and with rather plain features. In character he had a lively sense of fun, was totally guileless, and never happier than when in the light-hearted company of children. The money that he sporadically earned was often frittered away or happily given away to the next good cause that presented itself so that any financial security tended to be fleeting and short-lived. Goldsmith's talents were unreservedly recognised by Samuel Johnson whose patronage - somewhat resented by Boswell - aided his eventual recognition in the literary world and the world of drama.