He was born in Bethel, Connecticut, the son of an inn- and store-keeper. Barnum first started as a store-keeper, and was also involved with the lottery mania then prevailing in the United States. After failing in business, he started in 1829 a weekly paper, The Herald of Freedom, in Danbury, Connecticut; after several libel suits and a prosecution which resulted in imprisonment, he moved to New York City in 1834, and in 1835 began his career as a showman, with his purchase and exhibition of a blind and almost completely paralysed African-American slave woman, Joice Heth, claimed by Barnum to have been the nurse of George Washington, and to be over a hundred and sixty years old.

With this woman and a small company he made well-advertised and successful tours in America until 1839, though Joice Heth died in 1836, when her age was proved to be not more than seventy. After a period of failure he purchased Scudder's American Museum, New York, in 1841; to this he added considerably and it became one of the most popular shows in the United States. He made a special hit in 1842 with the exhibition of Charles Stratton, the celebrated midget "General Tom Thumb", as well as the Fiji Mermaid which he exhibited in collaboration with his Boston counterpart Moses Kimball. His collection also included the original Siamese twins, Chang and Eng. In 1843 Barnum hired the traditional Native American dancer Do-Hum-Me. During 1844-45 Barnum toured with Charles Stratton in Europe and met with Queen Victoria. A remarkable instance of his enterprise was the engagement of Jenny Lind to sing in America at $1,000 a night for one hundred and fifty nights, all expenses being paid by the entrepreneur. The tour began in 1850, and was a great success for both Lind and Barnum.

Barnum retired from the show business in 1855, but had to settle with his creditors in 1857, and began his old career again as showman and museum proprietor. In Brooklyn, New York in 1871, he established "P.T. Barnum's Grand Traveling Museum, Menagerie, Caravan, and Circus", a travelling amalgamation of circus, menagerie and museum of "freaks", which by 1872 was billing itself as "The Greatest Show on Earth". It went through a number of variants on these names: "P.T. Barnum's Traveling World's Fair, Great Roman Hippodrome and Greatest Show On Earth", and after an 1881 merger with James Bailey and James L. Hutchinson, "P.T. Barnum's Greatest Show On Earth, And The Great London Circus, Sanger's Royal British Menagerie and The Grand International Allied Shows United", soon shortened to "Barnum & London Circus". He and Bailey split up again in 1885, but came back together in 1888 with the "Barnum & Bailey Greatest Show On Earth", later "Barnum & Bailey Circus", which toured around the world. The show's primary attraction was Jumbo, an African elephant he purchased in 1882 from the London Zoo.

Barnum died on April 7, 1891 and is buried in Mountain Grove Cemetery, Bridgeport, Connecticut. His circus was eventually sold to Ringling Brothers on July 8, 1907, for a price of US$400,000.

Barnum wrote several books, including The Humbugs of the World (1865), Struggles and Triumphs (1869), and his Autobiography (first in 1854, and later editions including 1869).

Barnum was significantly involved in the politics surrounding race, slavery, and sectionalism in the period leading up the American Civil War. As mentioned above, he had some of his first success as an impressario through his slave Joice Heth. Around 1850, he was involved in a hoax about a weed that would turn black people white.

Barnum was involved (both as performer and promoter) in blackface minstrelsy. According to Eric Lott, Barnum's minstrel shows were often more double-edged in their humor than most at this period. While still replete with racist stereotypes, Barnum's shows also satirized white racial attitudes, as in a stump speech in which a black phrenologist (like all performers in the show, actually a white man in blackface) made a dialect speech parallelling and parodying lectures given at the time to "prove" the superiority of the white race: "You see den, dat clebber man and dam rascal means de same in dutch, when dey boph white; but when one white and de udder's black, dat's a grey hoss ob anoder color." (Lott, 1993, 78)

Promotion of minstrel shows led indirectly to his sponsorship in 1853 of H.J. Conway's politically watered-down stage version of Harriet Beecher Stowe's Uncle Tom's Cabin; the play, at Barnum's American Museum, gave the story a happy ending, with Tom and various other slaves freed. The success of this Uncle Tom led, in turn, to his promotion of a production of a play based on Stowe's Dred: A Tale of the Great Dismal Swamp. By 1860, Barnum had become a Republican.