Ferrell was born in Irvine, California, to Betty Kay (née Overman; born 1940), a Teacher who taught at Old Mill School elementary school and Santa Ana College, and Roy Lee Ferrell Jr. (born 1941), a musician with The Righteous Brothers. His parents were both natives of Roanoke Rapids, North Carolina, and moved to California in 1964. Ferrell's ancestry includes English, German, and Irish. He has a younger brother named Patrick. When he was eight years old, his parents divorced. Ferrell said of the divorce: "I was the type of kid who would say, 'Hey, look at the bright side! We'll have two Christmases'." The divorce was amicable and both parents were committed to their children. The biggest Problem was his father's line of work. As a person in show Business, his paychecks were never steady and he was gone from home months at a time. Growing up in this environment made Ferrell not want to go into show Business, but get a steady job.

Ferrell has worked as a voice actor in several animated television programs and films, including his portrayal of Bob Oblong, a 1950s-style father with no arms or legs, in the short-lived animated television series The Oblongs. He has had several guest appearances on Family Guy, where he played the Black Knight in "Mr. Saturday Knight", as well as Fat Greek Guy and Miles "Chatterbox" Musket in Fifteen Minutes of Shame. Ferrell also starred as Ted (a.k.a. The Man in the Yellow Hat) in the film Curious George and guest voiced on an episode of the FOX sitcom King of the Hill as a politically correct soccer coach. He voiced the title character in the 2010 DreamWorks Animation film Megamind as well as President Business in The Lego Movie, released in 2014.

Ferrell participated in a 79th Academy Awards musical-comedy performance with John C. Reilly and Jack Black, wherein they sang a song about comedies being snubbed by the voters in favor of dramas.

After graduating with a B.A. degree in Sports information in 1990, he knew he did not want to do broadcasting. He took up a job as a hotel valet where, on his second day, he tore a baggage rack off the top of a van by trying to drive it under a low-lying beam. He also worked as a Teller at Wells Fargo, but came up short $300 the first day and $280 the second; he was not stealing the money, but was just careless and error-prone. In 1991, encouraged by his mother to pursue something he liked, Ferrell moved to Los Angeles. He successfully auditioned for the comedy group The Groundlings, where he spent time developing his improvisation skills.

After SNL's decline in popularity in 1994–1995 and in need of new cast members for the next season, a Producer saw The Groundlings and asked Ferrell, Kattan, and Cheri Oteri to audition for SNL's main Producer, Lorne Michaels. Ferrell joined Saturday Night Live in 1995 and left in 2002 after a seven-year tenure. He has returned to host four times.

His original characters included Morning Latte co-host Tom Wilkins, Ed the Horse's twin brother Ned, fictional Blue Öyster Cult member Gene Frenkle (physically modeled after the band's vocalist Eric Bloom), music Teacher Marty Culp, Spartan Cheerleader Craig Buchanan, Dale Sturtevant from Dissing Your Dog, Hank of the Bill Brasky Buddies, David Leary from Dog Show, and night clubber Steve Butabi in a Sketch that was turned into a feature film in 1998's A Night at the Roxbury. Ferrell became the highest paid cast member of Saturday Night Live in 2001 with a season salary of $350,000.

The title role in Elf (2003) followed, as did another MTV Movie Awards nomination. Ferrell continued to land comedy roles in 2004 and 2005 in films such as Melinda and Melinda, Anchorman: The Legend of Ron Burgundy, Starsky & Hutch earning himself a place among Hollywood's Frat Pack. In 2005, Ferrell earned $40 million. In 2006, Ferrell starred in Stranger Than Fiction and Talladega Nights: The Ballad of Ricky Bobby. Both received critical and box office success. Ferrell's performance in Stranger Than Fiction introduced audiences to the dramatic potential of Ferrell's acting talents, while Talladega Nights was his highest grossing live-action opening as of 2010 at $47 million. On December 27, 2006, 'The Magazine' named Ferrell as one of its three actors of the year in their 2006 year in review issue. A sequel to Anchorman, Anchorman 2: The Legend Continues, was released in 2013.

In August 2000, Ferrell married Swedish Actress Viveca Paulin, whom he met in 1995 at an acting class. They live in New York City and Orange County and have three sons, Magnus Paulin Ferrell (born March 7, 2004), Mattias Paulin Ferrell (born December 30, 2006), and Axel Paulin Ferrell (born January 23, 2010).

Ferrell returned to Saturday Night Live as a guest host on May 14, 2005; May 16, 2009; May 12, 2012; and January 27, 2018. For the first two hosting appearances, he reprised his role as Alex Trebek in the "Celebrity Jeopardy" sketches. On the May 14 appearance, Ferrell reprised his role as Robert Goulet in a fake commercial advertising a series of ringtones and, during the performance of the song "Little Sister" by musical guests Queens of the Stone Age, Ferrell came on stage playing the cowbell.

Ferrell appeared as part of a pre-game video package for the Rose Bowl along with Texas alum Matthew McConaughey. Ferrell also sang a song at the ESPY Awards in 2006 about Lance Armstrong and Neil Armstrong. He and John C. Reilly also did a spot during the 2008 ESPY Awards where they made demands in order for them to appear at the ESPYs like asking Portland Trail Blazers' center Greg Oden to tuck them in at night and tell them stories of the old times or to bring back the Cold War so the Olympics can be interesting again.

In 2007, Autograph magazine named Ferrell the worst Celebrity autographer. Its Editor stated: "What's so frustrating about Will Ferrell being the worst autograph signer this past year is that he used to be so nice to fans and Collectors and a great signer. What makes him so bad is that he'll taunt people asking for his autograph." In response, Ferrell stated: "I don't know how I got on the list. I sign a lot of autographs." He has, however, admitted to taunting autograph-seekers: "I do. I really do. I'm like, 'How badly do you want this autograph?' 'Are you sure?' 'You say you're my biggest fan, really, prove it.' I'll do things like that. They have to earn it."

In September 2008, Ferrell released another video entitled "Will Ferrell Answers Internet Questions" where he takes some pressing questions and comments from his fans.

Ferrell made his Broadway debut taking on departing U.S. President George W. Bush in a one-man show called You're Welcome America. A Final Night with George W. Bush. The show started performances on January 20, 2009, in previews—Bush's final day in office—at the Cort Theatre and opened officially on February 1. The limited engagement played through March 15, 2009.

Ferrell made a comical debut as a relief pitcher for the Round Rock Express, the Triple-A affiliate of the Texas Rangers, on May 6, 2010. He was introduced as Billy Ray "Rojo" Johnson, and was brought in to relief pitch for the sixth inning. He then entertained the fans by bringing a sack of beer cans to the mound, as well as being ejected and getting chased by the opposing batter. He revealed himself to the fans when his moustache fell off during the chase. The appearance was cooked up by Ferrell and the Express, who sent out a press release announcing Johnson's "signing" to promote The Will Powered Golf Classic the following day at the nearby Cimarron Hills Country Club, which benefits Cancer for College, an organization that provides scholarships to cancer survivors.

Ferrell appeared in the 2011 video for "Make Some Noise" by the Beastie Boys, in the front of a limo, playing a cowbell. He stars in Casa de Mi Padre, a telenovela spoof comedy set in a ranch with Mexican stars Diego Luna and Gael García Bernal. The movie is told in melodramatic telenovela form and features English-language subtitles. He starred alongside Zach Galifianakis in the 2012 political comedy The Campaign, which garnered mediocre reviews and grossed $104 million against a budget of $95 million. Also in 2012, he appeared in the comedy Tim and Eric's Billion Dollar Movie and starred as Armando Álvarez in the Spanish-language comedy Casa de Mi Padre, which was directed by frequent collaborator Matt Piedmont.

In August 2012, whilst in Australia promoting The Campaign, Ferrell made a guest appearance on the Ch-10 live-panel news/comedy show The Project. He found himself speaking via video link to Australian Prime Minister Julia Gillard, during which they had a humorous conversation about hairdressing. Ferrell supported Barack Obama in the 2012 presidential election. In February 2013, Ferrell endorsed Eric Garcetti for mayor of Los Angeles.

Ferrell and Red Hot Chili Peppers Drummer Chad Smith, who have had a long running joke feud over how both look like each other, appeared on the May 22, 2014 episode of The Tonight Show Starring Jimmy Fallon for a charity drum-off battle. Despite Smith clearly giving the better performance, Ferrell was named the winner and awarded a giant gold cowbell. Both were joined by Smith's Chili Peppers bandmates for a performance of "Don't Fear the Reaper" with Ferrell playing cowbell. On June 10, 2014, Ferrell and Smith challenged Metallica Drummer Lars Ulrich to a drum-off with Ferrell saying Ulrich looks "eerily similar" to the two of them. Ulrich accepted the challenge two days later.

Ferrell played in five games of Major League Baseball spring training on March 12, 2015 for 10 Cactus League teams as part of promoting a Funny or Die comedy/charity special. He played for the Arizona Diamondbacks, Los Angeles Angels, Los Angeles Dodgers, San Diego Padres, Cincinnati Reds, Oakland Athletics, Seattle Mariners, Chicago Cubs, Chicago White Sox, and the San Francisco Giants, playing all 10 positions, including designated hitter. According to Baseball Reference, Ferrell faced and retired one batter – pitching on behalf of the Dodgers and ending with a 0.00 ERA. The memorabilia from his one-day professional baseball career was sold and was auctioned and the proceeds were sent to two cancer charities. Ferrell went 0–2 with two strikeouts over the day, but managed to foul off a 92 mph fastball from the Giants' Jean Machi.

On January 7, 2016, it was announced that Ferrell would become a part-owner of Los Angeles FC, a Major League Soccer team set to begin playing in 2018, one of several Celebrity owners of the team alongside Mia Hamm and Magic Johnson.

On May 12, 2017, Ferrell was awarded an honorary D.H.L. degree by University of Southern California.

On April 13, 2018, Ferrell was involved in a serious two-car collision in California, where he was riding in an SUV that flipped over. Ferrell was one of three passengers in the car. Ferrell was seen talking on his cell phone while being loaded into an ambulance. Ferrell and another Passenger was unhurt in the accident, although two others were injured. He was released from hospital shortly after, said to be "doing fine".