Born william Cuthbert Falkner in New Albany, Mississippi, william Faulkner was the first of four sons of Murry Cuthbert Falkner (August 17, 1870 – August 7, 1932) and Maud Butler (November 27, 1871 – October 16, 1960). He had three younger brothers: Murry Charles "Jack" Falkner (June 26, 1899 – December 24, 1975), author John Faulkner (September 24, 1901 – March 28, 1963), and Dean Swift Falkner (August 15, 1907 – November 10, 1935).

As a teenager in Oxford, Faulkner dated Estelle Oldham (1897–1972), the popular daughter of Major Lemuel and Lida Oldham, and believed he would some day marry her. However, Estelle dated other boys during their romance, and in 1918 one of them, Cornell Franklin, proposed marriage to her before Faulkner did. Estelle's parents insisted she marry Cornell, as he was an Ole Miss law graduate, had recently been commissioned as a major in the Hawaiian Territorial Forces, and came from a respectable family with which they were old friends. Estelle's marriage to Franklin fell apart ten years later, and they divorced in April 1929.

In 1918, Faulkner's surname went from "Falkner" to Faulkner. According to one story, a careless typesetter simply made an error. When the misprint appeared on the title page of his first book, Faulkner was asked whether he wanted the change. He supposedly replied, "Either way suits me."

Faulkner is one of the most celebrated Writers in American literature generally and Southern literature specifically. Though his work was published as early as 1919, and largely during the 1920s and 1930s, Faulkner was not widely known until receiving the 1949 Nobel Prize in Literature, for which he became the only Mississippi-born Nobel winner. Two of his works, A Fable (1954) and his last novel The Reivers (1962), won the Pulitzer Prize for Fiction. In 1998, the Modern Library ranked his 1929 novel The Sound and the Fury sixth on its list of the 100 best English-language novels of the 20th century; also on the list were As I Lay Dying (1930) and Light in August (1932). Absalom, Absalom! (1936) appears on similar lists. His first published story, "A Rose for Emily", is one of the most famous an American has written.

From the early 1920s to the outbreak of World War II, Faulkner published 13 novels and many short stories. Such a body of work formed the basis of his reputation and earned him the Nobel Prize at age 52. Faulkner's prodigious output includes his most celebrated novels such as The Sound and the Fury (1929), As I Lay Dying (1930), Light in August (1932), and Absalom, Absalom! (1936). Faulkner was also a prolific Writer of short stories.

Faulkner wrote two volumes of poetry which were published in small printings, The Marble Faun (1924), and A Green Bough (1933), and a collection of mystery stories, Knight's Gambit (1949).

Although Faulkner is identified with Mississippi, he was residing in New Orleans, Louisiana, in 1925 when he wrote his first novel, Soldiers' Pay. After being directly influenced by Sherwood Anderson, he made his first attempt at fiction writing. Anderson assisted in the publication of Soldiers' Pay and Mosquitoes, Faulkner's second novel, set in New Orleans, by recommending them to his publisher.

During the summer of 1927, Faulkner wrote his first novel set in his fictional Yoknapatawpha County, titled Flags in the Dust. This novel drew heavily on the traditions and history of the South, in which Faulkner had been engrossed in his youth. He was extremely proud of the novel upon its completion and he believed it to be a significant step up from his previous two novels. However, when submitted for publication, it was rejected by the publishers Boni & Liveright. Faulkner was devastated by this rejection, but he eventually allowed his literary agent, Ben Wasson, to significantly edit the text, and the novel was published in 1929 as Sartoris. (The original version was issued as Flags in the Dust in 1973.)

In the autumn of 1928, just after his 31st birthday, he began working on The Sound and the Fury. He started by writing three short stories about a group of children with the last name Compson, but soon began to feel that the characters he had created might be better suited for a full-length novel. Perhaps as a result of disappointment in the initial rejection of Flags in the Dust, Faulkner had now become indifferent to his publishers and wrote this novel in a much more experimental style. In describing the writing process for this work, Faulkner would later say, "One day I seemed to shut the door between me and all publisher's addresses and book lists. I said to myself, 'Now I can write.'" After its completion, Faulkner insisted that Ben Wasson not do any editing or add any punctuation for clarity.

Two months later, Faulkner and Estelle wed in June 1929 at College Hill Presbyterian Church just outside Oxford, Mississippi. They honeymooned on the Mississippi Gulf Coast at Pascagoula, then returned to Oxford, first living with relatives while they searched for a home of their own to purchase. In 1930, Faulkner purchased the antebellum home Rowan Oak, known at that time as The Shegog Place from Irish planter Robert Shegog. After his death, Estelle and their daughter, Jill, lived at Rowan Oak until Estelle's death in 1972. The property was sold to the University of Mississippi that same year. The house and furnishings are maintained much as they were in Faulkner's day. Faulkner's scribblings are preserved on the wall, including the day-by-day outline covering a week he wrote on the walls of his small study to help him keep track of the plot twists in his novel, A Fable.

His first short story collection, These 13 (1931), includes many of his most acclaimed (and most frequently anthologized) stories, including "A Rose for Emily", "Red Leaves", "That Evening Sun", and "Dry September". Faulkner set many of his short stories and novels in Yoknapatawpha County — based on, and nearly geographically identical to, Lafayette County, of which his hometown of Oxford, Mississippi, is the county seat. Yoknapatawpha was Faulkner's "postage stamp", and the bulk of work that it represents is widely considered by critics to amount to one of the most monumental fictional creations in the history of literature. Three of his novels, The Hamlet, The Town and The Mansion, known collectively as the Snopes Trilogy, document the town of Jefferson and its environs, as an extended family headed by Flem Snopes insinuates itself into the lives and psyches of the general populace.

By 1932, Faulkner was in need of money. He asked Wasson to sell the serialization rights for his newly completed novel, Light in August, to a magazine for $5,000, but none accepted the offer. Then MGM Studios offered Faulkner work as a Screenwriter in Hollywood. Although not an avid moviegoer, he needed the money, and so accepted the job offer and arrived in Culver City, California, in May 1932. There he worked with Director Howard Hawks, with whom he quickly developed a friendship, as they both enjoyed drinking and hunting. Howard Hawks' brother, william Hawks, became Faulkner's Hollywood agent. Faulkner would continue to find reliable work as a Screenwriter from the 1930s to the 1950s.

Faulkner was awarded the 1949 Nobel Prize for Literature for "his powerful and artistically unique contribution to the modern American novel". It was awarded at the following year's banquet along with the 1950 Prize to Bertrand Russell. Faulkner detested the fame and glory that resulted from his recognition. His aversion was so great that his 17-year-old daughter learned of the Nobel Prize only when she was called to the principal's office during the school day.

When Faulkner visited Stockholm in December 1950 to receive the Nobel Prize, he met Else Jonsson (1912–1996), widow of Journalist Thorsten Jonsson (1910–1950), reporter for Dagens Nyheter in New York from 1943–46, who had interviewed Faulkner in 1946 and introduced his works to Swedish readers. Faulkner and Else had an affair that lasted until the end of 1953. At the banquet where they met in 1950, publisher Tor Bonnier introduced Else as the widow of the man responsible for Faulkner's winning the prize.

He donated part of his Nobel money "to establish a fund to support and encourage new fiction writers", eventually resulting in the PEN/Faulkner Award for Fiction, and donated another part to a local Oxford bank, establishing a scholarship fund to help educate African-American teachers at Rust College in nearby Holly Springs, Mississippi. The government of France made Faulkner a Chevalier de la Légion d'honneur in 1951.

Faulkner was awarded two Pulitzer Prizes for what are considered "minor" novels: his 1954 novel A Fable, which took the Pulitzer in 1955, and the 1962 novel, The Reivers, which was posthumously awarded the Pulitzer in 1963. (The award for A Fable was a controversial political choice. The jury had selected Milton Lott's The Last Hunt for the prize, but Pulitzer Prize Administrator Professor John Hohenberg convinced the Pulitzer board that Faulkner was long overdue for the award, despite A Fable being a lesser work of his, and the board overrode the jury's selection, much to the disgust of its members.) He also won the U.S. National Book Award twice, for Collected Stories in 1951 and A Fable in 1955. In 1946 he was one of three finalists for the first Ellery Queen Mystery Magazine Award and placed second to Rhea Galati.

In an interview with The Paris Review in 1956, Faulkner remarked:

Faulkner served as Writer-in-Residence at the University of Virginia at Charlottesville from February to June 1957 and again in 1958.

On June 17, 1962, Faulkner suffered a serious injury in a fall from his horse, which led to thrombosis. He suffered a fatal heart attack on July 6, 1962, at the age of 64 at Wright's Sanatorium in Byhalia, Mississippi. Faulkner is buried with his family in St. Peter's Cemetery in Oxford, alongside the grave of an unidentified family friend, whose stone is marked only with the initials "E.T."

The United States Postal Service issued a 22-cent postage stamp in his honor on August 3, 1987. Faulkner had once served as Postmaster at the University of Mississippi, and in his letter of resignation in 1923 wrote:

Southeast Missouri State University, where the Center for Faulkner Studies is located, also owns a generous collection of Faulkner materials, including first editions, manuscripts, letters, photographs, artwork, and many materials pertaining to Faulkner's time in Hollywood. The university possesses many personal files and letters kept by Joseph Blotner, along with books and letters that once belonged to Malcolm Cowley, another famous Editor for william Faulkner. The university achieved the collection due to a generous donation by Louis Daniel Brodsky, a collector of Faulkner materials, in 1989.