Wentz' parents met while campaigning for former Vice President Joe Biden's senatorial run in the 1970s. Wentz recalled in a Rolling Stone interview that his earliest musical memory was listening to The Foundations' song "Build Me Up Buttercup" in the back of his father's car. Wentz attended New Trier High School and North Shore Country Day School, where he was an all-state soccer player. He considered pursuing a professional career in the sport, but decided that music was a more fulfilling choice; he says that he "always had a magical connection to the ball. But it didn't feel like an adventure. Music was more of a challenge and, in the end, felt more interesting."

Wentz was primarily involved in the Chicago hardcore punk scene and was in several bands in the late 1990s. These included First Born (first band, formed in 1993), Birthright, Extinction, Arma Angelus (alongside Tim McIlrath, frontman of Rise Against), Yellow Road Priest, and Racetraitor. He and Arma Angelus' Bassist Joe Trohman founded the pop-punk band Fall Out Boy after Trohman introduced Pete to a musical acquaintance, Patrick Stump. Andy Hurley agreed to drum part-time, but only joined the band full-time later. In 2002, Arma Angelus, the band in which Wentz was the vocalist, played its last show.

During his first year of high school, he began skipping school regularly and smoking marijuana with friends, but later quit as it was affecting his grades at school. After graduating from high school in 1997, he attended DePaul University where he studied political science, dropping out one quarter shy of graduation to focus on Fall Out Boy.

In 2002, Fall Out Boy released an EP called Fall Out Boy/Project Rocket Split EP. Soon after, in 2003, the band released their mini-LP Fall Out Boy's Evening Out with Your Girlfriend on Uprising Records. This album would later be digitally remastered and reissued after the band's third, successful full-album release From Under the Cork Tree, on the major label Island Records. In 2003, the band released their first full-length album, Take This to Your Grave through Fueled By Ramen. Fall Out Boy signed with major label Island Records in 2003 and in 2004 released an acoustic EP and DVD entitled, My Heart Will Always Be the B-Side to My Tongue.

Wentz has bipolar disorder, and has taken medication for it since he was eighteen. In February 2005, Wentz attempted suicide by taking an overdose of the anxiety medication Ativan, and as a result, spent a week in the hospital. Commenting on the event to a magazine, he said:

Wentz opened a nightclub in New York with his bandmates as well as members of Gym Class Heroes, The Academy Is..., and Cobra Starship; the bands' managers are also involved in the enterprise. Called Angels & Kings, the club occupies the former space on 11th Street near Avenue A that housed the Orchid Lounge. Notable guests, including Tommy Hilfiger, arrived for the grand opening on April 20, 2007. In June 2007, Wentz celebrated the opening of Angels & Kings' second location in Chicago.

Wentz was also an outspoken critic of California's Proposition 8, and attended many anti-Prop 8 rallies. He believes that voters were "tricked into" voting for the proposition. In a statement, he said, "Many people were intimidated on this issue due to the scary misleading communications on the other side. I believe that this is, and has always been, a civil rights issue. We should not allow inequality like this in America." He was also vocal in his support of Barack Obama in the 2008 Presidential Election, designing a shirt promoting Obama's campaign through his clothing line, Clandestine Industries.

In 2009, he made a cameo appearance as himself in Degrassi Goes Hollywood.

Wentz collaborated with Mark Hoppus on the track "In Transit" on the Almost Alice Soundtrack for the 2010 movie, Alice in Wonderland. He was also a judge for the 10th and 11th annual Independent Music Awards to support independent artists' careers.

On February 8, 2011, Simpson filed for divorce, citing "irreconcilable differences". She asked for joint custody and primary physical custody of their son with visitation for Wentz, along with spousal support. However, a later report said that Simpson believed the couple simply "married too young", with the source stating that, "It was honestly a classic case of marrying young, having a kid young and growing apart over the years". Wentz reportedly did not want the divorce. Their divorce was finalized on November 22, 2011.

Twitter account that he didn't think it would ever come to fruition. However, in February 2012, he posted a photo on his personal blog of what appeared to be a rough draft of the book's manuscript, explaining that he was currently in the process of editing Rainy Day Kids and that it would be 40–50 pages longer than he originally expected. On December 13, 2012, Wentz revealed the cover for the book, now titled Gray, on his personal blog. The book, which was written with MTV News Writer and former FNMTV co-host James Montgomery, was released on February 26, 2013.

On February 4, 2013, the band announced their hiatus was over, via their official webpage. They released a new single off their upcoming album, a video for the single, upcoming tour dates and a pre-order campaign for the new album titled Save Rock and Roll.

On February 17, 2014, Wentz and his current girlfriend Meagan Camper announced that the couple were expecting their first child together and Wentz's second. Their son was born on August 21, 2014. On January 2, 2018 Wentz posted to his Instagram that he and Camper were expecting their second child together and Wentz's third.

In 2016, he made a guest appearance on the Nickelodeon series, School of Rock. In 2017, he made a guest appearance in Teen Titans Go!