Chaim Topol was born in Tel Aviv in 1935, in what was then Mandatory Palestine. His father, Jacob Topol, had immigrated to Mandatory Palestine from Russia in the early 1930s and worked as a plasterer; he also served in the Haganah paramilitary organization. His mother, Rel (née Goldman) Topol, was a seamstress. Though the young Chaim wanted to become a commercial Artist, his elementary school teachers saw a theatrical side to him, and encouraged him to act in school plays and read stories to the class.

Topol married Galia Finkelstein in October 1956. They have one son and two daughters. The couple resides in Galia's childhood home in Tel Aviv. Topol's hobbies include sketching and sculpting.

Between 1960 and 1964, Topol performed with the Batzal Yarok ("Green Onion") satirical theatre company, which also toured Israel. Other members of the group included Uri Zohar, Nechama Hendel, Zaharira Harifai, Arik Einstein, and Oded Kotler. In 1960, Topol co-founded the Haifa Municipal Theatre with Yosef Milo, serving as assistant to the Director and acting in plays by Shakespeare, Ionesco, and Brecht. In 1965 he performed in the Cameri Theatre in Tel Aviv.

Topol's first film appearance was in the 1961 film I Like Mike, followed by the 1962 Israeli film El Dorado. His breakthrough role came as the lead character in the 1964 film Sallah Shabati. Adapted for the screen by Ephraim Kishon from his original play, the social satire depicts the hardships of a Mizrahi Jewish immigrant family in Israel in the 1950s, satirizing "just about every pillar of Israeli society: the Ashkenazi establishment, the pedantic bureaucracy, corrupt political parties, rigid kibbutz ideologues and ... the Jewish National Fund's tree-planting program". Topol, who was 29 during the filming, was familiar playing the role of the family patriarch, having performed skits from the play with his Nahal troupe during his army years. He contributed his own ideas for the part, playing the character as a more universal Sephardi Jew instead of specifically a Yemenite, Iraqi, or Moroccan Jew, and asking Kishon to change the character's first name from Saadia (a recognizably Yemenite name) to Sallah (a more general Mizrahi name).

At an October 1963 awards ceremony, Topol was a recipient of Israel's David's Harp award in arts and entertainment. He received a Best Actor award from the San Sebastián International Film Festival for his performance in the 1972 film Follow Me! In 2008, he was named an Outstanding Member of the Israel Festival for his contribution to Israeli culture. In 2014, the University of Haifa conferred upon Topol an honorary degree in recognition of his 50 years of activity in Israel's cultural and public life. In 2015, he received the Israel Prize for lifetime achievement.

He was featured on two BBC One programs, the 6-part series Topol's Israel (1964) and It's Topol (1968). A Hebrew-language documentary of his life, Chaim Topol – Life as a Film, aired on Israel's Channel 1 in 2011, featuring interviews with his longtime actor friends in Israel and abroad.

In 1966, Topol made his English-language film debut as Abou Ibn Kaqden in the Mickey Marcus biopic Cast a Giant Shadow.

In 1967, Topol founded Variety Israel, an organization serving children with special needs. He is also a co-founder and chairman of the board of Jordan River Village, a year-round camp for Arab and Jewish children with life-threatening illnesses, which opened in 2012.

In casting the 1971 film version of Fiddler on the Roof, Director Norman Jewison and his production team sought an actor other than Zero Mostel for the lead role. This decision was a controversial one, as Mostel had made the role famous in the long-running Broadway musical and wanted to star in the film. But Jewison and his team felt Mostel would eclipse the character with his larger-than-life personality. Jewison flew to London in February 1968 to see Topol perform as Tevye during his last week with the London production, and chose him over Danny Kaye, Herschel Bernardi, Rod Steiger, Danny Thomas, Walter Matthau, Richard Burton, and Frank Sinatra, who had also expressed interest in the part.

Topol appeared in more than 30 films in Israel and abroad. Among his notable English-language appearances are the title role in Galileo (1975), directed by Joseph Losey; Dr. Hans Zarkov in Flash Gordon (1980); and Milos Columbo in the James Bond film For Your Eyes Only (1981).

In 1976, Topol originated the leading role of the baker, Amiable, in the new musical The Baker's Wife, but was fired after eight months by Producer David Merrick. In her autobiography, Patti LuPone, his co-star in the production, claimed that Topol had behaved unprofessionally on stage. The show's Composer, Stephen Schwartz, claimed that Topol's behavior greatly disturbed the cast and Directors and resulted in the production not reaching Broadway as planned. In 1988, Topol starred in the title role in Ziegfield at the London Palladium. He returned to the London stage in 2008 in the role of Honoré, from Maurice Chevalier's 1958 film Gigi.

His autobiography, Topol by Topol, was published in London by Weindenfel and Nicholson (1981). He also authored To Life! (1994) and Topol's Treasure of Jewish Humor, Wit and Wisdom (1995).

In 1983 Topol reprised the role of Tevye in a revival of Fiddler on the Roof in West End theatre. In 1989, he played the role in a 30-city U.S. touring production. As he was by then the approximate age of the character, he commented, "I didn't have to spend the Energy playing the age". In 1990–1991, he again starred as Tevye in a Broadway revival of Fiddler at the Gershwin Theatre. In 1991, he was nominated for a Tony Award for Best Performance by a Leading Actor in a Musical, losing to Jonathan Pryce in Miss Saigon. Topol again played Tevye in a 1994 London revival, which became a touring production. In that production, his youngest daughter, Adi Topol Margalith, played one of his daughters.

Topol reprised the role of Tevye for a 1997–1998 touring production in Israel, as well as a 1998 show at the Regent Theatre in Melbourne. In September 2005 he returned to Australia for a Fiddler on the Roof revival at the Capitol Theatre in Sydney, followed by an April 2006 production at the Lyric Theatre in Brisbane and a June 2006 production at Her Majesty's Theatre in Melbourne. In May 2007, he starred in a production in the Auckland Civic Theatre.

On January 20, 2009, Topol began a farewell tour of Fiddler on the Roof as Tevye, opening in Wilmington, Delaware. He was forced to withdraw from the tour in Boston owing to a shoulder injury, and was replaced by Theodore Bikel and Harvey Fierstein, both of whom had portrayed Tevye on Broadway. Topol estimated that he performed the role more than 3,500 times.

Topol has illustrated approximately 25 books in both Hebrew and English. He has also produced drawings of Israeli national figures. His sketches of Israeli Presidents were reproduced in a 2013 stamp series issued by the Israel Philatelic Federation, as was his self-portrait as Tevye for a 2014 commemorative stamp marking the 50th anniversary of the Broadway debut of Fiddler on the Roof.

He is a founder of Variety Israel, an organization serving children with special needs, and Jordan River Village, a year-round camp for Arab and Jewish children with life-threatening illnesses, for which he serves as chairman of the board. In 2015 he was awarded the Israel Prize for lifetime achievement.