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Waits was born and raised in a middle-class family in Whittier, California. Inspired by the work of Bob Dylan and the Beat Generation, he began singing on the San Diego folk music circuit as a young boy. He relocated to Los Angeles in 1972, where he worked as a songwriter before signing a recording contract with Asylum Records. His first albums were the jazz-oriented Closing Time (1973) and The Heart of Saturday Night (1974), which reflected his lyrical interest in nightlife, poverty, and criminality. He repeatedly toured the United States, Europe, and Japan, and attracted greater critical recognition and commercial success with Small Change (1976), Blue Valentine (1978), and Heartattack and Vine (1980). He produced the soundtrack for Francis Ford Coppola's film One from the Heart (1981), and subsequently made cameo appearances in several Coppola films.

In 1980, Waits married Kathleen Brennan, split from his manager and record label, and moved to New York City. With Brennan's encouragement and frequent collaboration, he pursued a more experimental and eclectic musical aesthetic influenced by the work of Harry Partch and Captain Beefheart. This was reflected in a series of albums released by Island Records, including Swordfishtrombones (1983), Rain Dogs (1985), and Franks Wild Years (1987). He continued appearing in films, notably starring in Jim Jarmusch's Down by Law (1986), and also made theatrical appearances. With theatre director Robert Wilson, he produced the musicals The Black Rider (1990) and Alice (1992), first performed in Hamburg. Having returned to California in the 1990s, his albums Bone Machine (1992), The Black Rider (1993), and Mule Variations (1999) earned him increasing critical acclaim and multiple Grammy Awards. In the late 1990s, he switched to the record label ANTI-, which released Blood Money (2002), Alice (2002), Real Gone (2004), and Bad as Me (2011).

Despite a lack of mainstream commercial success, Waits has influenced many musicians and gained an international cult following, and several biographies have been written about him. In 2015, he was ranked at No. 55 on Rolling Stone's "100 Greatest Songwriters of All Time". He was inducted into the Rock and Roll Hall of Fame in 2011.