William's great-grandfather, Edward Osler, was variously described as either a merchant seaman or a pirate. One of William's uncles (Edward Osler (1798–1863)), a medical officer in the Royal Navy, wrote the Life of Lord Exmouth and the poem The Voyage. (Osler, Edward, 1798–1863. The Voyage : a poem, written at sea, and in the West Indies, and illustrated by papers on natural history. London : Longman, 1830). william Osler's father, Featherstone Lake Osler (1805–1895), the son of a shipowner at Falmouth, Cornwall, was a former Lieutenant in the Royal Navy who served on HMS Victory. In 1831 Featherstone Osler was invited to serve on HMS Beagle as the science officer on Charles Darwin's historic voyage to the Galápagos Islands, but he turned it down because his father was dying. In 1833, Featherstone Osler announced he wanted to become a minister of the Church of England.

As a teenager, Featherstone Osler was aboard HMS Sappho when it was nearly destroyed by Atlantic storms and left adrift for weeks. Serving in the Navy, he was shipwrecked off Barbados. In 1837 Featherstone Osler officially retired from the Navy and emigrated to Canada, becoming a "saddle-bag minister" in rural Upper Canada. When Featherstone Osler and his bride, Ellen Free Picton, arrived in Canada, they were nearly shipwrecked again on Egg Island in the Gulf of Saint Lawrence. The Oslers had several children, including william, Britton Bath Osler, and Sir Edmund Boyd Osler.

William Osler was born in Bond Head, Canada West (now Ontario) on July 12, 1849, and raised after 1857 in Dundas, Ontario. (He was called william after william of Orange, who won the Battle of the Boyne on July 12, 1690.) His mother, who was very religious, prayed that Osler would consecrate to God's Service and, in 1867, her son announced he would follow his father's footsteps into the ministry. He was educated at Trinity College School (then located in Weston, Ontario) and entered Trinity College, Toronto (now part of the University of Toronto) in the autumn of 1867.

At the time, however, he was becoming increasingly interested in medical science, under the influence of James Bovell, and Rev. william Arthur Johnson, who both became major influences for Osler at this time, encouraging him to switch his career. In 1868, Osler enrolled in the Toronto School of Medicine, a privately owned institution, not part of the Medical Faculty of the University of Toronto. Osler lived with Bovell for a time, and through Johnson, he was introduced to the writings of Sir Thomas Browne; his Religio Medici caused a deep impression on him. Osler left the Toronto School of Medicine after being accepted to the MDCM program at McGill University Faculty of Medicine in Montreal and he received his medical degree (MDCM) in 1872.

Following post-graduate training in Europe, Osler returned to the McGill University Faculty of Medicine as a professor in 1874. Here he created the first formal journal club. In 1884, he was appointed Chair of Clinical Medicine at the University of Pennsylvania in Philadelphia and in 1885, was one of the seven founding members of the Association of American Physicians, a society dedicated to "the advancement of scientific and practical Medicine." When he left Philadelphia in 1889, his farewell address, "Aequanimitas", was on the imperturbability (calm amid storm) and equanimity (moderated emotion, tolerance) necessary for Physicians.

An inveterate prankster, he wrote several humorous pieces under the pseudonym "Egerton Yorrick Davis", even fooling the editors of the Philadelphia Medical News into publishing a report on the extremely rare phenomenon of penis captivus, on December 13, 1884. The letter was apparently a response to a report on the phenomenon of vaginismus reported three weeks previously in the Philadelphia Medical News by Osler’s colleague Theophilus Parvin. Davis, a prolific Writer of letters to medical societies, purported to be a retired U.S. Army surgeon living in Caughnawaga, Quebec (now Kahnawake), author of a controversial paper on the obstetrical habits of Native American tribes that was suppressed and unpublished. Osler would enhance Davis's myth by signing Davis's name to hotel registers and medical conference attendance lists; Davis was eventually reported drowned in the Lachine Rapids in 1884.

In 1889, he accepted the position as the first Physician-in-Chief of the new Johns Hopkins Hospital in Baltimore, Maryland. Shortly afterwards, in 1893, Osler was instrumental in the creation of the Johns Hopkins School of Medicine and became one of the school's first professors of Medicine. Osler quickly increased his reputation as a clinician, humanitarian, and Teacher. He presided over a rapidly expanding domain. In the hospital's first year of operation, when it had 220 beds, 788 patients were seen for a total of over 15,000 days of treatment. Sixteen years later, when Osler left for Oxford, over 4,200 patients were seen for a total of nearly 110,000 days of treatment.

Osler is well known in the field of gerontology for the speech he gave when leaving Hopkins to become the Regius Professor of Medicine at Oxford. "The Fixed Period", given on February 22, 1905, included some controversial words about old age. Osler, who had a well-developed humorous side to his character, was in his mid-fifties when he gave the speech and in it he mentioned Anthony Trollope's The Fixed Period (1882), which envisaged a college where men retired at 67 and after being given a year to settle their affairs, would be "peacefully extinguished by chloroform". He claimed that, "the effective, moving, vitalizing work of the world is done between the ages of twenty-five and forty" and it was downhill from then on. Osler's speech was covered by the popular press which headlined their reports with "Osler recommends chloroform at sixty". The concept of mandatory euthanasia for humans after a "fixed period" (often 60 years) became a recurring theme in 20th century imaginative literature—for Example, Isaac Asimov's 1950 novel Pebble in the Sky. In the 3rd edition of his Textbook, he also coined the description of pneumonia as "the old man's friend" since it allowed elderly individuals a quick, comparatively painless death. Coincidentally, Osler himself died of pneumonia.

In 1911, he initiated the Postgraduate Medical Association, of which he was the first President. In the same year, Osler was named a baronet in the Coronation Honours List for his contributions to the field of Medicine.

He died at the age of 70, on December 29, 1919 in Oxford, during the Spanish influenza epidemic, most likely of complications from undiagnosed bronchiectasis. His wife, Grace, lived another nine years but succumbed to a series of strokes. Sir william and Lady Osler's ashes now rest in a niche in the Osler Library at McGill University. They had two sons, one of whom died shortly after birth. The other, Edward Revere Osler, was mortally wounded in combat in World War I at the age of 21, during the 3rd battle of Ypres (also known as the battle of Passchendaele). At the time of his death in August 1917, he was a second lieutenant in the (British) Royal Field Artillery; Lt. Osler's grave is in the Dozinghem Military Cemetery in West Flanders, Belgium. According to one biographer, Osler was emotionally crushed by the loss; he was particularly anguished by the fact that his influence had been used to procure a military commission for his son, who had mediocre eyesight. Lady Osler (Grace Revere) was born in Boston in 1854; her paternal great-grandfather was Paul Revere. In 1876, she married Samuel W. Gross, chairman of surgery at Jefferson Medical College in Philadelphia. Gross died in 1889 and in 1892 she married william Osler who was then professor of Medicine at Johns Hopkins University.

In 1925, a biography of william Osler was written by Harvey Cushing, who received the 1926 Pulitzer Prize for the work. A later biography by Michael Bliss was published in 1999. In 1994 Osler was inducted into the Canadian Medical Hall of Fame.

Osler was a prolific author and a great collector of books and other material relevant to the history of Medicine. He willed his library to the Faculty of Medicine of McGill University where it now forms the nucleus of McGill University's Osler Library of the History of Medicine, which opened in 1929. The printed and extensively annotated catalogue of this donation is entitled "Bibliotheca Osleriana: a catalogue of books illustrating the history of Medicine and science, collected, arranged and annotated by Sir william Osler, Bt. and bequeathed to McGill University". Osler was a strong supporter of libraries and served on the library committees at most of the universities at which he taught and was a member of the Board of Curators of the Bodleian Library in Oxford. He was instrumental in founding the Medical Library Association in North America and served as its second President from 1901–1904. In Britain he was the first (and only) President of the Medical Library Association of Great Britain and Ireland and also a President of the Bibliographical Society of London (1913).

Osler was a founding donor of the American Anthropometric Society, a group of academics who pledged to donate their brains for scientific study. Osler's brain was taken to the Wistar Institute in Philadelphia to join the Wistar Brain Collection. In April 1987 it was taken to the Mütter Museum, on 22nd Street near Chestnut in Philadelphia where it was displayed during the annual meeting of the American Osler Society.

Osler was a prolific author and public speaker and his public speaking and writing were both done in a clear, lucid style. His most famous work, 'The Principles and Practice of Medicine' quickly became a key text to students and clinicians alike. It continued to be published in many editions until 2001 and was translated into many languages. It is notable in part for supporting the use of bloodletting as recently as 1923. Though his own textbook was a major influence in Medicine for many years, Osler described Avicenna as the "author of the most famous medical textbook ever written". He noted that Avicenna's Canon of Medicine remained "a medical bible for a longer time than any other work". Osler's essays were important guides to Physicians. The title of his most famous essay, "Aequanimitas", espousing the importance of imperturbability, is the motto on the Osler family crest and is used on the Osler housestaff tie and scarf at Hopkins.

The contribution to medical education of which he was proudest was his idea of clinical clerkship – having third- and fourth-year students work with patients on the wards. He pioneered the practice of bedside teaching, making rounds with a handful of students, demonstrating what one student referred to as his method of "incomparably thorough physical examination." Soon after arriving in Baltimore, Osler insisted that his medical students attend at bedside early in their training. By their third year they were taking patient histories, performing physicals and doing lab tests examining secretions, blood and excreta.

Throughout his life, Osler was a great admirer of the 17th century physician and Philosopher Sir Thomas Browne.