At the age of 12, Staley began playing drums and played in several glam bands in his early teens, but aspired to be a singer. He later traded in his drum set for a microphone. He met up with Jerry Cantrell in 1987, and formed Alice in Chains with him. Originally a glam band, Alice in Chains was one of the first bands of the grunge movement, and had marked metal influences.

Like several other musicians in the Seattle grunge scene, Staley experimented with heroin. By the 1990s, Staley was battling an addiction. The darker side of addiction had its influence on Staley's lyrics. The Alice in Chains album Dirt showed this preoccupation in songs like "Sickman" and "Dirt," while Cantrell's lyrics focused mainly on the thoughts of death. "Would?" in particular addresses the death of Andrew Wood, singer of Mother Love Bone, who had died of a heroin overdose.

Staley's vocal range was that of a Baritone and as is usual amongst rock singers it was much extended at the top. Staley could hit a G#4, and he can be heard doing this on the song We Die Young on the last line of the lyrics (the "And" of the final "And we die young"). Staley would often belt or loudly scream these top notes using a lot of vibrato, and he was well known for this trait as a constituent part of his vocal style. It was also much copied by others in the Grunge scene, it is not known whether Kurt Cobain directly lifted Staley's style for the closing line of Smells Like Teen Spirit, but Cobain used screaming and belting of the note in an identical way to finish the aforementioned song.

Alice in Chains did not tour in support of their album Jar of Flies, and rumors of Staley's addiction began spreading. Alice in Chains went into hiatus, regrouping to record a self-titled album which was released in 1995. To accompany the album, the band released a home video, The Nona Tapes, in which they poke fun at the rumours of Staley's addiction - several sources had announced his death during the hiatus, Charles Cross would later say that they had Staley's obituary on stand-by at The Rocket - but the band lapsed again, failing to complete tours planned in support of the album. After the death of his girlfriend, Demri Parrott in 1996 from bacterial endocarditis caused by drug use, Staley became more and more reclusive. Fans got to see firsthand the effects of Staley's drug abuse during the band's Unplugged appearance. Staley was visibly weak and emaciated and had problems singing at times. His last performance was on 3 July 1996 in Kansas City, Missouri, while they were touring with KISS after their Unplugged appearance.

Staley appeared briefly from his low-key lifestyle to do a radio interview and made two new tracks (Get Born Again, Died) with Alice in Chains for the Music Bank Box set in 1999. That was the last time he would work with Alice in Chains.

On April 20, 2002, Staley was found dead in his home two weeks post mortem after injecting a mixture of heroin and cocaine known as a "speedball". He was 34 years old. His body was also surrounded by various drug possessions and equipment. He was readily identified by his mother and attending personnel. Interestingly, the coroner estimated he died on April 5th, the same date that fellow Seattle Grunge rocker Kurt Cobain was estimated to have died eight years earlier.

Friend and bandmate Jerry Cantrell, who had tried to stay in touch with Staley and maintain their friendship, released the solo album Degradation Trip in June 2002 and dedicated the album to Staley's memory.

Aaron Lewis, lead singer of post-grunge/nu-metal band Staind, penned a tribute to Staley titled "Layne" for Staind's 2003 album 14 Shades of Grey.