Hefner was born in Chicago, Illinois, and grew up "in a very typically Methodist repressed home" with "no show of affection of any kind". He went to Sayre Elementary School, and Steinmetz High School in Chicago. He majored in psychology at the University of Illinois at Urbana-Champaign. After graduating from high school in 1944, he served in the U.S. Army during the closing months of WWII. Before starting Playboy, Hefner was a copywriter for Esquire magazine.

Hefner claims to have hatched the idea for Playboy while he was in college and that the name for the magazine came from deciding that his "baby" should have the name he "knew he was himself". In reality, the original working title of his magazine was Stag Party but Hefner was forced to change it to avoid a trademark conflict with the existing Stag Magazine. The name "Playboy" was suggested by a friend.

From his experience in advertising, Hefner saw the need to package sexuality into aspirational categories, to tell a story about it that placed men in the narrative itself in a way that was not just acceptable but desirable. In launching Playboy, perhaps the smartest thing Hefner did was to establish his personality as that of an urbane sophisticate who enjoyed the company of many young women.

Hefner has been married twice. His daughter Christie Hefner, born in 1952, is from his marriage to Millie Williams, whom he married in 1949 and divorced in 1959. Christie eventually joined her father's editorial staff, and now holds the title of Chairperson of Playboy Enterprises (PEI). He also had a son, David who is a computer programmer.

He married Playmate Kimberley Conrad in 1988. Conrad became Playmate of the Year in 1989. This marriage broke up in 1998, though Hefner and Conrad have yet to divorce. The couple had two children—Marston, born 1990, and Cooper, born 1991. During this period, Hefner lived monogamously.

Hefner is known to have been involved with the following Playmates: then 18-year-old Donna Michelle, Marilyn Cole, Lillian Muller, Patti McGuire, Terri Welles, Shannon Tweed, and Brande Roderick. All seven were subsequently chosen Playmate of the Year.

Other noteworthy attachments include Mary Warren (1964-68); Barbi Benton (1968-74); Karen Christy (1971-74); ex-Sunday school teacher Sondra Theodore (1974-1981) and then 19-year-old Carrie Leigh (1983-1987). The last liaison ended with a failed $35 million palimony suit by Leigh.

After his separation from Kimberley Conrad Hefner in 1999, Hefner began living with an ever-changing number of blonde women, whose ages range from 18 to 28. He told Vanity Fair magazine "And here's the surprise bit—it's what they want!" The actual nature of the relationship between Hefner and these women at his relatively advanced age is sometimes the subject of speculation. No children have come of these relationships . The 2005 E! reality television series The Girls Next Door chronicles Hefner's three most recent girlfriends, Holly Madison, Bridget Marquardt and Kendra Wilkinson. The three all spend time with Hefner, though Madison shares his bed at night and appears to be the most "involved" with Hefner.

Hefner purchased the crypt in the Westwood Village Memorial Park Cemetery in Westwood, California beside Marilyn Monroe.

The Hugh M. Hefner First Amendment Awards were created by daughter Christie in 1979 "to honor individuals who have made significant contributions in the vital effort to protect and enhance First Amendment rights for Americans."