Sherwood Anderson was born in Camden, Ohio, on September 13, 1876, as the third of seven children. His parents, Irwin M. and Emma Anderson, moved from town to town frequently after the failure of Anderson's father's business. Anderson attended school only intermittently in order to help his family's finances by working a variety of odd jobs including stable boy, house painter, and newsboy. He left school at the age of 14. His father (a former Union soldier) worked as a harness maker and house painter after the family finally settled down in Clyde, Ohio. Anderson moved to Chicago, Illinois, at the age of 17, where he worked in a factory by day and was a business student by night. He joined the National Guard in 1895 at the age of 19 and fought in Cuba during the Spanish-American war. After his service ended, Anderson returned to Ohio and finished a final year of schooling at Wittenberg College in Springfield.

Anderson moved around Ohio frequently until 1904 when he married Cornelia Lane, a woman of good education and background, and fathered three children. He began to write fiction while working in a manufacturing plant in Elyria. Anderson left Lane and his children and moved back to Chicago after suffering an emotional collapse in 1912, and stayed there working as a copy writer for the Taylor-Critchfield Advertising Company. While in Chicago he also joined the Chicago Group, which included other writers such as Theodore Dreiser and Carl Sandburg. In 1916, Anderson divorced Lane; he later claimed that she had been unsympathetic to his attempts at writing. He then married sculptor and musician Tennessee Mitchell.

Shortly after his divorce, Anderson wrote his first two novels, (1916) and (1917). In 1919, he began writing what would eventually become his most famous work, , a collection of related short stories. His short stories were soon successful, and he published additional collections such as (1921), (1923), and (1933). Between 1920 and 1922, he wrote the novel (1920) and various other works and ended his marriage to Mitchell.

In 1923, Anderson published the novel , which was a moderate success and was praised by other authors such as F. Scott Fitzgerald. Anderson married Elizabeth Prall and moved to New Orleans, Louisiana, in 1924. It was here that he wrote his best-seller, (1925). Anderson's third marriage was beginning to break down but was sustained with the help of Eleanor Copenhaver, a social worker who was also his future wife.

Anderson moved to Marion, Virginia, where he built a house and worked on his farm and also edited two newspapers he had purchased in 1927. He also wrote for the newspapers ( and the ) under the pen name of Buck Fever and even lectured to earn extra income. Anderson finally separated from Prall in 1929 (officially divorced in 1932) and married Copenhaver in 1933.

Anderson died March 8, 1941, at the age of 64 of peritonitis while on a ship in the Panama area. It was discovered in an autopsy that he had swallowed a toothpick from a martini which perforated his colon. He is buried in Round Hill Cemetery in Marion, Virginia.