He was born in Almonte, Ontario, Canada, the older son of Scottish immigrants who had arrived in the area in 1851 and worked in the mining industry.

In 1891, while working as a physical education teacher at the YMCA International Training School in Springfield, Massachusetts, and coaching rugby at McGill University he was asked to look for a way to relieve his students' boredom during indoor winter gym classes.

Inspired mostly by a Canadian game he played as a child in Ontario, Canada called Duck-on-a-Rock, Naismith's basketball started December 15, 1891 with thirteen rules, twelve of which are still used today, a peach basket nailed to either end of the school's gymnasium, and two teams of nine players. On January 15, 1892 Naismith published the rules for basketball. The original rules did not include what we know today as the dribble. They initially only allowed the ball to be moved up the court via a pass. Following each "goal" a jump ball was taken in the middle of the court. Although it wasn't a rule, players would commonly use the dust of coal to cover the palms of their hands, allowing them to get a better grip on the ball. The coal palm was used up until the early 1930s when the Depression hit, making the raw materials very pricey. Also interesting was the rule surrounding balls out of bounds - the first player to retrieve the ball received possession.

Basketball became a popular men's sport in the United States and Canada very quickly, and spread to other countries as well. Additionally, there were several efforts to establish (under modified rules) a women's version; this met with great resistance in some circles and was consequently far slower to become truly widespread.

The men's sport was officially added to the Olympic Games program at the 1936 Summer Olympics in Berlin. There, Naismith handed out the medals to three North American teams; United States, for the Gold Medal, in a game that was played outdoors in rain with Naismith's native country of Canada, for the Silver Medal, and Mexico, for their Bronze medal win. Women's basketball finally became an Olympic event in Montreal during the 1976 Summer Olympics. Previously, there had been a men's basketball competition, in connection with the 1904 Games at St. Louis, USA.

Naismith moved to the University of Kansas, in 1898, following his studies in Denver, becoming a professor, and the school's first basketball coach. University of Kansas went on to develop one of the nation's most storied college basketball programs.

Ironically, Naismith is the only Kansas coach to have a losing record (55-60) during his tenure at the school. Nevertheless, Naismith has one of the greatest coaching legacies in basketball history. Naismith coached Forrest "Phog" Allen, who then became one of the coaches with the most wins in U.S. college basketball history, and his eventual successor at Kansas. Phog Allen was the college basketball coach of Dean Smith and Adolph Rupp, who are the two winningest of men's college basketball and a combined total of six NCAA championships. Adolph Rupp was the college basketball coach of Pat Riley who is one of the winningest coaches in NBA history and four NBA championships. Dean Smith went on to be the college basketball coach of hall of fame coach Larry Brown and basketball great Michael Jordan.

In the late 1930s Naismith played a role in the formation of the National Association of Intercollegiate Basketball, which later became the National Association of Intercollegiate Athletics.

In August 1936, while attending the Berlin Olympics, he was named honorary President of the International Basketball Federation.

Naismith married Maude Sherman in 1894. They had five children. Naismith became a naturalized American citizen on May 4, 1925. After Maude's death in 1937, he married Florence Kincade on June 11 1939, less than six months before his own death, in Lawrence, Kansas, of a cerebral hemorrhage. He is buried there alongside his first wife in Lawrence, the hometown of the University of Kansas where he taught.

He has been honored extensively in his native country Canada and also in other nations. He was the founding inductee when on February 17, 1968 the Naismith Memorial Basketball Hall of Fame, named in his honor, opened in Springfield, Massachusetts.

In 2005 James Naismith's grandson, Ian Naismith, planned on selling the original copy of the basketball rule book. The rules were passed down on Naismith's death to his youngest son, James Naismith, who was Ian's father. James lived in Corpus Christi, Texas.