Teresa of Avila was born in 1515 in Ávila, Spain. Her paternal grandfather, Juan Sánchez de Toledo, was a marrano (Jewish convert to Christianity) and was condemned by the Spanish Inquisition for allegedly returning to the Jewish faith. Her father, Alonso Sánchez de Cepeda, a successful wool merchant and one of the wealthiest men in Avila, bought a knighthood and successfully assimilated into Christian society. Teresa's mother, Beatriz de Ahumada y Cuevas, was especially keen to raise her daughter as a pious Christian. Teresa was fascinated by accounts of the lives of the saints, and ran away from home at age seven with her brother Rodrigo to find martyrdom among the Moors. Her uncle stopped them as he was returning to the town, having spotted the two outside the town walls.

In the monastery ("cloister" is an area where only monastics have access), she suffered greatly from illness. Early in her sickness, she experienced periods of religious ecstasy through the use of the devotional book Tercer abecedario espiritual, translated as the Third Spiritual Alphabet (published in 1527 and written by Francisco de Osuna). This work, following the Example of similar writings of medieval Mystics, consisted of directions for examinations of conscience and for spiritual self-concentration and inner contemplation (known in mystical nomenclature as oratio recollectionis or oratio mentalis). She also employed other mystical ascetic works such as the Tractatus de oratione et meditatione of Saint Peter of Alcantara, and perhaps many of those upon which Saint Ignatius of Loyola based his Spiritual Exercises and possibly the Spiritual Exercises themselves.

Teresa entered a Carmelite Monastery of the Incarnation in Ávila, Spain, on 2 November 1535. She found herself increasingly in disharmony with the spiritual malaise prevailing at the monastery. Among the 150 nuns living there, the observance of cloister — designed to protect and strengthen the spirit and practice of prayer — became so lax that it actually lost its very purpose. The daily invasion of visitors, many of high social and political rank, spoiled the atmosphere with frivolous concerns and vain conversations. These violations of the solitude absolutely essential to progress in genuine contemplative prayer grieved Teresa to the extent that she longed to do something.

Around 1556, various friends suggested that her newfound knowledge was diabolical, not Divine. She began to inflict various tortures and mortifications of the flesh upon herself. But her confessor, the Jesuit Saint Francis Borgia, reassured her of the Divine inspiration of her thoughts. On St. Peter's Day in 1559, Teresa became firmly convinced that Jesus Christ presented himself to her in bodily form, though invisible. These visions lasted almost uninterrupted for more than two years. In another vision, a seraph drove the fiery point of a golden lance repeatedly through her heart, causing an ineffable spiritual-bodily pain.

The incentive to give outward practical expression to her inward motive was inspired in Teresa by the Franciscan priest Saint Peter of Alcantara who became acquainted with her early in 1560, and became her spiritual guide and counselor. She now resolved to found a reformed Carmelite convent, correcting the laxity which she had found in the Cloister of the Incarnation and others. Guimara de Ulloa, a woman of wealth and a friend, supplied the funds. Teresa worked for many years encouraging Spanish Jewish converts to follow Christianity.

The absolute poverty of the new monastery, established in 1562 and named St. Joseph's (San José), at first excited a scandal among the citizens and authorities of Ávila, and the little house with its chapel was in peril of suppression; but powerful patrons, including the bishop himself, as well as the impression of well-secured subsistence and prosperity, turned animosity into approval.

In March 1563, when Teresa moved to the new cloister, she received the papal sanction to her prime principle of absolute poverty and renunciation of property, which she proceeded to formulate into a "Constitution". Her plan was the revival of the earlier, stricter rules, supplemented by new regulations such as the three disciplines of ceremonial flagellation prescribed for the Divine Service every week, and the discalceation of the nun. For the first five years, Teresa remained in pious seclusion, engaged in writing.

In 1567, she received a patent from the Carmelite general, Rubeo de Ravenna, to establish new houses of her order, and in this effort and later visitations she made long journeys through nearly all the provinces of Spain. Of these she gives a description in her Libro de las Fundaciones. Between 1567 and 1571, reform convents were established at Medina del Campo, Malagón, Valladolid, Toledo, Pastrana, Salamanca, and Alba de Tormes.

As part of her original patent, Teresa was given permission to set up two houses for men who wished to adopt the reforms; she convinced John of the Cross and Anthony of Jesus to help with this. They founded the first convent of Discalced Carmelite Brethren in November 1568 at Duruello. Another friend, Jerónimo Gracián, Carmelite visitator of the older observance of Andalusia and apostolic commissioner, and later provincial of the Teresian reforms, gave her powerful support in founding convents at Segovia (1571), Beas de Segura (1574), Seville (1575), and Caravaca de la Cruz (Murcia, 1576), while the deeply mystical John, by his power as Teacher and preacher, promoted the inner life of the movement.

In 1576 a series of persecutions began on the part of the older observant Carmelite order against Teresa, her friends, and her reforms. Pursuant to a body of resolutions adopted at the general chapter at Piacenza, the "definitors" of the order forbade all further founding of convents. The general chapter condemned her to voluntary retirement to one of her institutions. She obeyed and chose St. Joseph's at Toledo. Her friends and subordinates were subjected to greater trials.

Finally, after several years her pleadings by letter with King Philip II of Spain secured relief. As a result, in 1579, the processes before the inquisition against her, Gracian, and others were dropped, which allowed the reform to continue. A brief of Pope Gregory XIII allowed a special provincial for the younger branch of the discalced nuns, and a royal rescript created a protective board of four assessors for the reform.

During the last three years of her life, Teresa founded convents at Villanueva de la Jara in northern Andalusia (1580), Palencia (1580), Soria (1581), Burgos, and Granada (1582). In total seventeen convents, all but one founded by her, and as many men's cloisters were due to her reform activity of twenty years.

Her final illness overtook her on one of her journeys from Burgos to Alba de Tormes. She died in 1582, just as Catholic nations were making the switch from the Julian to the Gregorian calendar, which required the removal of 5–14 October from the calendar. She died either before midnight of 4 October or early in the morning of 15 October which is celebrated as her feast day. (According to liturgy as then in use, she died on the 15th in any case, counted from the sunset of the preceding day; 4 October, as it were, is occupied precisely on that rationale by the feast of St. Francis, who died on the evening of the 3rd.) Her last words were: "My Lord, it is time to move on. Well then, may your will be done. O my Lord and my Spouse, the hour that I have longed for has come. It is time to meet one another."

In the 1620s, Spain debated who should be the country's patron saint; the choices were either the current patron, Saint James Matamoros a combination of him and the newly canonised Saint Teresa of Ávila. Teresa's promoters said Spain faced newer challenges, especially the threat of Protestantism and societal decline at home, thus needing a more contemporary patron who understood those issues and could guide the Spanish nation. Santiago's supporters (Santiaguistas) fought back and eventually won the argument, but Teresa of Ávila remained far more popular at the local level. Saint James the Greater kept the title of patron saint for the Spanish people, and the most Blessed Virgin Mary under the title Immaculate Conception as the sole patroness for the entire Spanish Kingdom.

It was thought that Teresa carried a portable statue of the Child Jesus wherever she went. Contemporary history cannot confirm that the Prague image was what she was thought to have owned. Catholic pious beliefs follow the local legend, certainly already circulated by the early 1700s.

In 1622, forty years after her death, she was canonized by Pope Gregory XV. The Cortes exalted her to patroness of Spain in 1617, and the University of Salamanca previously conferred the title Doctor ecclesiae with a diploma. The title is Latin for Doctor of the Church, but is distinct from the papal honor of Doctor of the Church, which is always conferred posthumously and was finally bestowed upon her by Pope Paul VI on 27 September 1970, along with Saint Catherine of Siena, making them the first women to be awarded the distinction. Teresa is revered as the Doctor of Prayer. The mysticism in her works exerted a formative influence upon many Theologians of the following centuries, such as Francis of Sales, Fénelon, and the Port-Royalists.

Saint Teresa is also portrayed in the biographical 1984 film Teresa de Jesús, and shown in the movie protecting this infant statue in her many calamitous travels. In some scenes, the other religious sisters take turn in changing its vestments. The devotion to the Child Jesus spread quickly in Spain, possibly due to her mystical visions. The Spanish nuns who established Carmel in France brought this devotion with them, and it became widespread in France. Indeed, one of Teresa's most famous disciples, Saint Thérèse of Lisieux, a French Carmelite, herself named for Teresa, had as her religious name "Sister Thérèse of the Child Jesus and the Holy Face".

After her death, Saint Teresa was considered a candidate to become a national patron saint in Spain. A Santero image of the Immaculate Conception of El Viejo, said to have been sent with one of her brothers to Peru, Canonically crowned by Pope John Paul II on 28 December 1989 at the Shrine of El Viejo. Pious Catholic beliefs also associate Saint Teresa with the Infant Jesus of Prague with claims of former ownership and devotion.

Christia Mercer, a Columbia University philosophy professor, claims that the seventeenth-century Frenchman, René Descartes, lifted some of his most influential ideas from the Spanish author and Roman Catholic nun, Teresa of Ávila, who, fifty years before Descartes, wrote popular books about the role of philosophical reflection in intellectual growth. Mercer lays out her case in the journal Philosophical Studies, describing a number of striking similarities between Descartes’s seminal work Meditations on First Philosophy and Teresa’s Interior Castle.