Barnum was born in Bethel, Connecticut, the son of innkeeper, tailor and store-keeper Philo Barnum (1778–1826) and second wife Irene Taylor. He was the third great-grandson of Thomas Barnum (1625–1695), the English immigrant ancestor of the Barnum family in North America. His maternal grandfather Phineas Taylor was a Whig, legislator, landowner, justice of the peace, and lottery schemer, and he had a great influence on his favorite grandson. Barnum was adept at arithmetic but hated physical work. Barnum's Father died in 1826 when the boy was 16 years old.

On November 8, 1829, Barnum married Charity Hallett, nicknamed Chairy. The couple had four children: Caroline Cornelia (1833–1911), Helen Maria (1840–1920), Frances Irena (1842–1844), and Pauline Taylor (1846–1917).

Born in Bethel, Connecticut, Barnum became a small-business owner in his early twenties and founded a weekly newspaper, before moving to New York City in 1834. He embarked on an entertainment career, first with a variety troupe called "Barnum's Grand Scientific and Musical Theater", and soon after by purchasing Scudder's American Museum, which he renamed after himself. Barnum used the museum as a platform to promote hoaxes and human curiosities such as the Feejee mermaid and General Tom Thumb. In 1850 he promoted the American tour of singer Jenny Lind, paying her an unprecedented $1,000 a night for 150 nights. After economic reversals due to bad Investments in the 1850s, and years of litigation and public humiliation, he used a lecture tour, mostly as a temperance speaker, to emerge from debt. His museum added America's first aquarium and expanded the wax-figure department. While in New York, he converted to Universalism and was a member of the Church of the Divine Paternity, now the Fourth Universalist Society in the City of New York.

In 1835, when he was 25, he began his career as a showman with his purchase and exhibition of a blind and almost completely paralyzed slave woman, Joice Heth, whom an acquaintance was trumpeting around Philadelphia as George Washington's former nurse, and to be 161 years old. Though slavery was outlawed in New York at the time, he exploited a loophole that allowed him to lease her for a year for $1,000, borrowing $500 to complete the sale. Heth died in February 1836, at no more than 80 years old. Near the end of her life, Barnum had worked her for 10 to 12 hours a day, and after her death he hosted a live autopsy of her body in a New York Saloon. Their spectators paid 50 cents to see the dead woman cut up, as he “revealed” that she was likely half her purported age.

After a year of mixed success with his first variety troupe called "Barnum's Grand Scientific and Musical Theater," followed by the Panic of 1837 and three years of difficult circumstances, he purchased Scudder's American Museum, at Broadway and Ann Street, New York City, in 1841. Barnum improved the attraction, renamed "Barnum's American Museum," upgrading the building and adding exhibits, and it became a popular showplace. Barnum added a lighthouse lamp which attracted attention up and down Broadway and flags along the roof's edge that attracted attention in daytime. From between the upper windows, giant paintings of animals drew attention from pedestrians. The roof was transformed to a strolling garden with a view of the city, where he launched hot-air balloon rides daily. A changing series of live acts and curiosities, including albinos, giants, little people, "fat boys," Jugglers, magicians, exotic women, detailed Models of cities and famous battles, and, eventually, a menagerie of animals were added to the exhibits of stuffed animals.

In 1842, Barnum introduced his first major hoax, a creature with the head of a monkey and the tail of a fish, known as the "Feejee" mermaid. Barnum leased the "mermaid" from fellow museum owner Moses Kimball of Boston. Kimball became his friend, confidant, and collaborator. Barnum described his hoaxes and justified the act of perpetrating them by saying they were "advertisements to draw attention...to the Museum. I don't believe in duping the public, but I believe in first attracting and then pleasing them." Later, he crusaded against Fraudsters. Barnum followed that with the exhibition of Charles Stratton, the dwarf "General Tom Thumb" ("the Smallest Person that ever Walked Alone") who was then four years of age but was stated to be 11. With heavy coaching and natural talent, the boy was taught to imitate people from Hercules to Napoleon. By five, he was drinking wine and by seven smoking cigars for the public's amusement.

In year 1843 Barnum hired the traditional Native American Dancer fu-Hum-Me, the first of many Native Americans he presented. During 1844–45, Barnum toured with General Tom Thumb in Europe and met Queen Victoria, who was amused and saddened by the little man, and the event was a publicity coup. It opened the door to visits from royalty across Europe including the Czar of Russia and let him acquire dozens of attractions, including automatons and other mechanical marvels. He was almost able to buy the birth home of william Shakespeare. Barnum spent about three years abroad with Thumb. Barnum went on a spending spree, buying other museums, including Peale's museum in Philadelphia, the nation's first major museum. By late 1846, Barnum's Museum was drawing 400,000 visitors a year.

Barnum built four mansions in Bridgeport, Connecticut: Iranistan, Lindencroft, Waldemere, and Marina. Iranistan was the most notable: a fanciful and opulent Moorish Revival splendor designed by Leopold Eidlitz with domes, spires and lacy fretwork, inspired by the Royal Pavilion in Brighton, England. This mansion was built 1848 but burned down in 1857. The Marina Mansion was demolished by the University of Bridgeport in 1964 in order to build their cafeteria.

Barnum was significantly involved in politics, focusing on race, slavery, and sectionalism in the period leading up to the American Civil War. He had some of his first success as an impresario through Joice Heth, a slave he hired. Around 1850, he was involved in a hoax about a weed that would turn black people white.

On the tour, Barnum's publicity always preceded Lind's arrival and whipped up enthusiasm (he had up to 26 journalists on his payroll). After New York, the company toured the east coast of America, with continued success, and later took in Cuba and the southern states of the U.S. By early 1851, Lind had become uncomfortable with Barnum's relentless marketing of the tour, and she invoked a contractual right to sever her ties with him. They parted amicably, and she continued the tour for nearly a year under her own management. Lind gave 93 concerts in America for Barnum, earning her about $350,000; Barnum netted at least $500,000 (equivalent to $14,708,000 in 2017).

Promotion of minstrel shows led to his sponsorship in 1853 of H.J. Conway's politically watered-down stage version of Harriet Beecher Stowe's Uncle Tom's Cabin; the play, at Barnum's American Museum, gave the story a happy ending, with Tom and other slaves freed. The success led to a play based on Stowe's Dred: A Tale of the Great Dismal Swamp. His opposition to the Kansas-Nebraska Act of 1854, which supported slavery, led him to leave the Democratic Party to become a member of the new anti-slavery Republican Party. He had evolved from a man of Common stereotypes of the 1840s to a leader for emancipation by the Civil War.

Barnum wrote several books, including Life of P.T. Barnum (1854), The Humbugs of the World (1865), Struggles and Triumphs (1869), and The Art of Money-Getting (1880).

While he claimed "politics were always distasteful to me," Barnum was elected to the Connecticut legislature in 1865 as Republican representative for Fairfield and served four terms. In the debate over slavery and African-American suffrage with the ratification of the Thirteenth Amendment to the United States Constitution, Barnum spoke before the legislature and said, "A human soul, ‘that God has created and Christ died for,’ is not to be trifled with. It may tenant the body of a Chinaman, a Turk, an Arab or a Hottentot – it is still an immortal spirit."

Barnum ran for the United States Congress in 1867 and lost to his third cousin william Henry Barnum. In 1875, Barnum as mayor of Bridgeport, Connecticut, worked to improve the water supply, bring gas lighting to streets, and enforce liquor and prostitution laws. Barnum was instrumental in starting Bridgeport Hospital, founded in 1878, and was its first President.

Barnum did not enter the circus Business until he was 60 years old. In Delavan, Wisconsin in 1870 with william Cameron Coup, he established "P. T. Barnum's Grand Traveling Museum, Menagerie, Caravan & Hippodrome," a traveling circus, menagerie and museum of "freaks." It went through various names: "P.T. Barnum's Travelling World's Fair, Great Roman Hippodrome and Greatest Show On Earth," and after an 1881 merger with James Bailey and James L. Hutchinson, "P.T. Barnum's Greatest Show On Earth, And The Great London Circus, Sanger's Royal British Menagerie and The Grand International Allied Shows United," soon shortened to "Barnum & Bailey's." This entertainment phenomenon was the first circus to display three rings, which made it the largest circus the world had ever seen. The show's first primary attraction was Jumbo, an African elephant he purchased in 1882 from the London Zoo. The Barnum and Bailey Circus still contained acts similar to his Traveling Menagerie: acrobats, freak shows, and the world-famous General Tom Thumb. Despite more fires, train disasters, and other setbacks, Barnum plowed ahead, aided by circus professionals who ran the daily operations. He and Bailey split up again in 1885, but came back together in 1888 with the "Barnum & Bailey Greatest Show On Earth," later "Barnum & Bailey Circus," which toured the world.

Charity Hallett Barnum, his wife, died on November 19, 1873. Barnum married Nancy Fish the following year, 1874.

Barnum was notably the legislative sponsor of a law enacted by the Connecticut General Assembly in 1879 that prohibited the use of “any drug, medicinal article or instrument for the purpose of preventing conception" that remained in effect in Connecticut until being overturned in 1965 by the U.S. Supreme Court Griswold v. Connecticut decision.

The Bridgeport & Port Jefferson Steamboat Company, which Barnum co-founded in 1883 with Charles E. Tooker, continues to operate across the Long Island Sound between Port Jefferson, New York, and Bridgeport, as of at least 2017. The company owns and operates three vessels, one of which is named the (M.V.) PT Barnum.

The Tufts University Biology Building is named in honor of Barnum. Jumbo eventually became the mascot of Tufts University, in honor of Barnum's 1889 donation of the elephant's stuffed hide.

At his death, most critics had forgiven Barnum and he was praised for good works, hailed as an icon of American spirit and ingenuity, and was perhaps the most famous American in the world. Just before his death, he gave permission to the Evening Sun to print his obituary, so that he might read it. On April 7, 1891, Barnum asked about the box office receipts for the day; a few hours later, he was dead.

In 1893, a statue in his honor was placed at Seaside Park, by the water in Bridgeport. Barnum had donated the land for this park in 1865.

His circus was sold to Ringling Brothers on July 8, 1907 for $400,000 (about $10.45 million in 2017 dollars). The Ringling Brothers and Barnum & Bailey circuses ran separately until they merged in 1919 forming the Ringling Bros. and Barnum & Bailey Circus.

In 1936, for the centennial of the city of Bridgeport, Connecticut, his portrait was used for the obverse of the commemorative Bridgeport Half Dollar.

To honor the 200th anniversary of Barnum's birth, the Bethel Historical Society commissioned a life-size sculpture, created by local resident David Gesualdi, that stands outside the public library. The statue was dedicated on September 26, 2010.

Walt Kelly, who grew up in Bridgeport, named the Pogo character P.T. Bridgeport after Barnum, and endowed the circus operator bear with a Barnum-like outsized personality and word balloons with lettering that resembled 19th century circus posters giving graphic depiction of the sort of colorful language Barnum was prone to use.